authors
- FAULI OLLER, RAMÓN
- MESA SANCHEZ, FRANCISCO DE BORJA
Losses from Horizontal Merger: an Extension to a Successive Oligopoly Model with Product Differentiation
Articles
Overview
published in
- MANCHESTER SCHOOL Journal
publication date
- September 2015
start page
- 604
end page
- 621
issue
- 5
volume
- 83
Digital Object Identifier (DOI)
International Standard Serial Number (ISSN)
- 1463-6786
Electronic International Standard Serial Number (EISSN)
- 1467-9957
abstract
- This paper generalizes the model of Salant et al. (1983; Quarterly Journal of Economics, Vol. 98, pp. 185-199) to a successive oligopoly model with product differentiation. Upstream firms produce differentiated goods, retailers compete in quantities, and supply contracts are linear. We show that if retailers buy from all producers, downstream mergers do not affect wholesale prices. Our result replicates that of Salant's, where mergers are not profitable unless the size of the merged firm exceeds 80 per cent of the industry. This result is robust to the type of competition.