Mergers with Differentiated Products: Where Do We Stand?

Valletti, Tommaso; Zenger, Hans

doi:10.1007/s11151-021-09810-5

Cited by 15 publications

(1 citation statement)

References 53 publications

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“…This approach was later developed, notably by Farrell and Shapiro (2010). The simplicity of the UPP formula was appreciated by both researchers and competition authorities, and was adopted for use in merger control by authorities on both side of the Atlantic (see Oldale andPadilla, 2013 andValletti andZenger, 2021). However, it has also come under criticism as being too simplistic to account fully for real-world competition dynamics.…”

Section: Relevant Literaturementioning

confidence: 99%

Horizontal Mergers and Supplier Power

Perkins,

Shekhar

2024

Rev Ind Organ

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Supplier market power—such as the ability of branded goods suppliers to dictate terms to retailers—is an important feature of many markets. We show that supplier power can counteract the effects of downstream mergers on consumer prices where there are two-part contracts. This is because greater market power allows suppliers to set contracts that internalise partially the impact of the merger on downstream prices. Post-merger, the supplier reduces the per-unit price at which it supplies the merged downstream firms, with the aim of maintaining total industry profitability—and then recoups the profits via a larger fixed fee. We modify the standard upward pricing pressure (UPP) formula to account for the supplier’s response to a horizontal merger in the downstream market, while preserving much of the simplicity of the standard approach.

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