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Review of Industrial Organization

, Volume 10, Issue 5, pp 533–540 | Cite as

Vertical mergers and selective price cutting

  • Ronald N. Johnson
  • Allen M. Parkman
Article

Abstract

A number of reasons have been offered for why businesses vertically merge. These include the facilitation of collusion and selective price cutting to circumvent rigid oligopolistic prices in upstream markets. This article presents a test of the second motive using data from the cement-concrete industries. Mergers in those industries are investigated because they were a controversial series of vertical mergers. The selective price cutting hypothesis is tested using ARIMA models with intervention components. Our results do not support that hypothesis.

Key words

Collusion cement concrete selective price cutting vertical mergers 

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Copyright information

© Kluwer Academic Publishers 1995

Authors and Affiliations

  • Ronald N. Johnson
    • 1
  • Allen M. Parkman
    • 2
  1. 1.Department of Agricultural Economics and EconomicsMontana State UniversityBozemanUSA
  2. 2.Anderson Schools of ManagementUniversity of New MexicoAlbuquerqueUSA

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