Wednesday, September 30, 2009

Upstream Horizontal Mergers and Efficiency Gains

Posted by D. Daniel Sokol

Chrysovalantou Milliou, Athens University of Economics and Business and Apostolis Pavlou address Upstream Horizontal Mergers and Efficiency Gains.

ABSTRACT: We study upstream horizontal mergers and their potential efficiency gains. We show that an upstream horizontal merger can give rise to two efficiency-enhancing effects when firms trade through two-part tariffs. It increases R&D investments and decreases wholesale prices when downstream competition is not too strong. Examining whether the merger’s potential efficiency gains can overcome its anti-competitive effects in terms of welfare, we show that when firms merge usually both of the above mentioned efficiencies are realized and they are passed on to consumers. This holds to a lesser extend when firms trade through linear contracts.

| Permalink

TrackBack URL for this entry:

Listed below are links to weblogs that reference Upstream Horizontal Mergers and Efficiency Gains: