A Neglected Theory of Harm: Joint Ventures as Facilitators of Collusion Across Markets

Cheng, Thomas K.; Kwok, Kelvin Hiu Fai

doi:10.2139/ssrn.3325153

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2018

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“…The authors do not compare the performance of a JV against that following a horizontal merger. Cheng and Kwok () provide an overview of the various antitrust theories of harm associated with input JVs.…”

Section: Introductionmentioning

confidence: 99%

Collaborate or Consolidate: Assessing the Competitive Effects of Production Joint Ventures

Aguelakakis¹,

Yankelevich

2018

Economic Inquiry

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We analyze collaborations in which two firms facing external competition reorganize to form an input joint venture as an alternative to horizontal merger. Under standard regularity conditions, the collaboration can lead to higher profits than a horizontal merger, though the effect on prices, quantities, and welfare depends on the form of downstream competition. In light of our results regarding profits, we provide reasons why firms might still wish to merge: imperfect information, cost synergies, and organizational asymmetries. We further consider how our comparisons change with the managerial structure of the joint venture (i.e., by delegation of input pricing). (JEL L13, L23, L42)

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Section: Introductionmentioning

confidence: 99%