Unilateral Effects of Horizontal Mergers with Vertical Relations Between Firms and Other Structural Market Changes
If one firm buys inputs from a competitor, the input price may be used to internalize the competition between the firms. Thus, positive unilateral pricing effects may arise if one firm starts to buy inputs from a competitor. Conversely, unilateral pricing effects may be small if two firms with vertical relations merge, as pre-merger competition is partly internalized through the input price. We present a method for adjusting the formula of Hausman et al. (Econ Lett 111(2):119–121, 2011), in order to predict correct unilateral pricing effects not only for horizontal mergers, but also for structural changes in markets where one firm sells inputs to a rival.
KeywordsMerger analysis Unilateral effects Vertical restrictions
JEL ClassificationL44 L42
The authors gratefully acknowledge the financial support of The Price Regulation Fund (det alminnelige prisreguleringsfond) administrated by the Norwegian Competition Authority (Konkurransetilsynet). The model in Sect. 3 was presented at the ACE (Association of competition economics) conference in 2015, as a part of a presentation about the Tele 2/TeliaSonera merger case. The authors would like to thank Lars Sørgard and Frode Steen for their valuable comments on early versions of the model.
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