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Analyzing Vertical Mergers With Auctions Upstream
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Book Synopsis Analyzing Vertical Mergers with Auctions Upstream by : Joseph U. Podwol
Download or read book Analyzing Vertical Mergers with Auctions Upstream written by Joseph U. Podwol and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a model of vertical mergers with open auctions upstream, This setting may be appropriate for industries where inputs are procured via auction-like "requests for proposal." For example, Drennan et al (2020) reports that a model of this type was used during the CVS-Aetna merger investigation, Our approach contrasts with a growing body of work on vertical mergers where input prices are determined through Nash bargaining, We discuss how the vertical merger effects of raising rivals' costs and eliminating double markup might be quantified in our particular model.
Book Synopsis Monopolization Through Endogenous Vertical Mergers by : Gamal Atallah
Download or read book Monopolization Through Endogenous Vertical Mergers written by Gamal Atallah and published by . This book was released on 2016 with total page 6 pages. Available in PDF, EPUB and Kindle. Book excerpt: While endogenous merger analysis has been applied to horizontal mergers, the thrust of vertical merger analysis has been based on exogenous mergers. The goal of this paper is to analyze endogenous vertical mergers. I consider a market structure with a downstream monopolist and an oligopolistic upstream industry. The downstream monopolist chooses to buy a certain number of the upstream firms. Mergers are endogenous, in the sense that the bids made by the downstream firm must be accepted by each of the integrated upstream firms, and must not exceed the increase in the profits of the downstream firm. It is shown that the unique equilibrium is complete monopolization: the buyer buys all the firms in the upstream industry. This result is consistent with the result that vertical mergers are profitable. However, it is in contrast with horizontal endogenous mergers, where complete monopolization is generally not an equilibrium.
Book Synopsis Analyzing Vertical Mergers by : Hans Zenger
Download or read book Analyzing Vertical Mergers written by Hans Zenger and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Following AT&T/Time Warner and the recent adoption of U.S. Vertical Merger Guidelines, vertical merger policy has again become a subject of intense debate. Some commentators have argued that vertical merger enforcement is too lax and should be invigorated, in particular in the U.S. Others see a greater risk of false positives and argue that the standard for intervention should remain high in such cases. Against this background, this article discusses the economics of assessing vertical mergers with a particular emphasis on recent European case practice.
Book Synopsis The Effects of Mergers in Open Auction Markets by : Keith Waehrer
Download or read book The Effects of Mergers in Open Auction Markets written by Keith Waehrer and published by . This book was released on 2001 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Analyzing Vertical Mergers by : Roger D. Blair
Download or read book Analyzing Vertical Mergers written by Roger D. Blair and published by . This book was released on 2020 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: With the adoption of the 2020 Vertical Merger Guidelines, the U.S. antitrust agencies have updated their guidance on vertical mergers for the Twenty-First Century. Although economists have long recognized the procompetitive benefits most vertical mergers generate, the law has not always followed suit, and has sometimes condemned vertical mergers for making the merged firm more efficient. In this article, we attempt to catalogue the extensive list of efficiencies that vertical mergers can generate, trace the often halting efforts to incorporate these insights into the law, and propose a framework that courts and agencies can use to assess the likely competitive effects of vertical transactions. We draw heavily upon leading cases, particularly Baker Hughes and AT&T, with two refinements. First, consistent with the final Guidelines (but not the earlier draft) and the economic literature noting a symmetry between unilateral anticompetitive effects (raising rivals' costs) and procompetitive effects (the elimination of double marginalization), which we call the “unilateral effects tradeoff,” we argue a plaintiff alleging a raising rivals cost (RRC) theory of harm must also address EDM as part of its prima facie case. Second, if the plaintiff carries its prima facie burden, then the defendant should be able to argue, and courts and Agencies should seriously consider, the full range of procompetitive efficiencies, which we call a “holistic efficiency analysis.”
Book Synopsis Vertical Mergers with Bilateral Contracting and Upstream and Downstream Investment by : Daniel P. O'Brien
Download or read book Vertical Mergers with Bilateral Contracting and Upstream and Downstream Investment written by Daniel P. O'Brien and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We extend the theory of bilateral vertical contracting to a double moral hazard setting where upstream and downstream firms make complementary investments that enhance demand, downstream firms make fixed investments to enter the downstream market, and contracts are private information and determined through simultaneous bilateral bargaining. We show that vertical mergers mitigate bilateral contracting externalities and hold-up, which leads to an increase in complementary investments. If downstream products are either sufficiently distant or sufficiently close substitutes, a vertical merger benefits the merging firm, consumers, and the unintegrated downstream firm. For intermediate degrees of product differentiation, a case with linear demand and quadratic investment costs shows that consumers benefit if the marginal cost of investment is sufficiently low as revealed, for example, by a high ratio of R&D investments to sales. We apply the model to a vertical merger in the computer industry.
Book Synopsis Do Vertical Mergers Facilitate Upstream Collusion? by : Volker Nocke
Download or read book Do Vertical Mergers Facilitate Upstream Collusion? written by Volker Nocke and published by . This book was released on 2004 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Pass-Through of Cost Reductions in Open Auction Markets with Application to Merger Effects by : Keith Waehrer
Download or read book Pass-Through of Cost Reductions in Open Auction Markets with Application to Merger Effects written by Keith Waehrer and published by . This book was released on 2019 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: Here we analyze how, in an open procurement auction, cost reductions among suppliers bidding to sell to a buyer affect the payoffs to the buyer and suppliers. When a single supplier enjoys a reduction in cost, its increase in expected payoff is equal to the expected increase in total surplus from the cost reduction. The buyer benefits not by capturing a portion of the increase in surplus but instead gains at the expense of the suppliers who do not enjoy the cost decrease. The buyer's benefit from a cost decrease, increases in the concentration among the suppliers who do not enjoy the cost decrease. These results have implications for vertical integration and merger analysis. Increases in concentration increase the incentive of buyers who are integrated upstream to make cost reducing investments in the supply of the good while the investment incentives of non-integrated suppliers remain unchanged. In terms of merger analysis these results suggest that pass through of merger specific cost savings will be higher if the non-merging firms in the market are more concentrated. In addition, mergers increase the incentives for vertically integrated sellers to make cost reducing investments, which may serve to mitigate the anticompetitive effects of a merger.
Book Synopsis Analyzing Vertical Mergers to Avoid False Negatives by : Steven C. Salop
Download or read book Analyzing Vertical Mergers to Avoid False Negatives written by Steven C. Salop and published by . This book was released on 2019 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This article analyzes three recent vertical mergers: a private antitrust case attacking the consummated merger of Jeld-Wen and Craftmaster Manufacturing Inc. (“CMI”) that was cleared by the DOJ in 2012 but subsequently litigated and won by the plaintiff, Steves & Sons in 2018; and two recent vertical merger matters investigated and cleared (with limited remedies) by 3-2 votes by the Federal Trade Commission in early 2019 -- Staples/Essendant and Fresenius/NxStage. There are some factual parallels among these three matters that make it interesting to analyze them together. First, the DOJ's decision to clear Jeld-Wen/CMI merger appears to be a clear false negative, and the two dissenting Commissioner suggest that the recent FTC decisions similarly are false negatives. Second, the DOJ and possibly the FTC in Staples/Essendant may have overlooked the “Frankenstein Monster” scenario of input foreclosure. Third, both the DOJ and the FTC in Fresenius/NxStage also apparently relied on the absence of complaints in making their clearance decisions. The analysis of these mergers also suggests several policy implications involving the need to analyze the full range of anticompetitive concerns, the potential for merger retrospectives by independent (as opposed to staff) researchers, the height of the evidentiary burden on the agencies to show competitive harm in light of their limited budgets, and the need for greater transparency in Commission statements, as well as the potential errors in relying on a lack of complaints.
Book Synopsis Vertical merger, collusion, and disruptive buyers by : Volker Nocke
Download or read book Vertical merger, collusion, and disruptive buyers written by Volker Nocke and published by . This book was released on 2010 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A Comparative Analysis by : Lezlie Gohrband
Download or read book A Comparative Analysis written by Lezlie Gohrband and published by . This book was released on 1982 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Antitrust Analysis of Vertical Mergers by : Koren Wong-Ervin
Download or read book Antitrust Analysis of Vertical Mergers written by Koren Wong-Ervin and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The generally well-accepted belief motivating modern antitrust analysis of vertical mergers -- i.e., acquisitions that combine companies in different levels of the same supply chain -- is that they are generally procompetitive or neutral. That belief is based upon a significant body of empirical evidence. Indeed, as former U.S. Federal Trade Commission (FTC) Bureau of Economics head Francine Lafontaine and Margaret Slade concluded, “[c]onsistent with the large set of efficiency motives for vertical mergers . . . the [empirical] evidence on the consequences of vertical mergers suggests that consumers mostly benefit from mergers that firms undertake voluntarily.” That view of the empirical evidence is consistent with other meta-studies of the empirical evidence by leading industrial organization economists from academia and the U.S. antitrust agencies. Consistent with this evidence, the U.S. antitrust agencies typically have rarely challenged vertical mergers. When they have challenged vertical mergers, they have tended to resolve concerns with narrowly tailored behavioral remedies, such as firewalls to prevent the sharing of rivals' competitively sensitive information, non-discrimination clauses to eliminate incentives to disfavor rivals, and requirements to supply and/or license competitors. This Article is organized as follows: Section I sets forth the empirical evidence supporting the widespread understanding that vertical integration is generally procompetitive or neutral, and responds to the major critiques of these studies. Section I also discusses typical justifications for vertical integration, namely avoiding the costly and risky processes of forming, administering, and enforcing contracts with independent suppliers and customers. Section II lays out the economic approach to antitrust analysis of vertical mergers, briefly addressing calls for the U.S. antitrust agencies to update their 1984 Non-Horizontal Merger Guidelines. Section III discusses remedies. The final section offers closing thoughts focusing on the relative expertise of agencies and courts as compared to merging parties in evaluating the costs and benefits of vertical integration.
Book Synopsis Market Structure and the Competitive Effects of Vertical Integration by : Simon Loertscher
Download or read book Market Structure and the Competitive Effects of Vertical Integration written by Simon Loertscher and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the competitive effects of backward vertical integration when firms exert market power upstream and compete à la Cournot downstream. Contrasting with previous literature, a small degree of vertical integration is always procompetitive because efficiency gains dominate foreclosure effects, and vertical integration even to full foreclosure can be procompetitive. Surprisingly, vertical integration is more likely to be procompetitive if the industry is otherwise more concentrated. Extensions analyze incentives to integrate and differentiated Bertrand competition downstream. Our analysis suggests that antitrust authorities should be wary of vertical integration when the integrating firm faces many competitors and should be permissive otherwise.
Book Synopsis On Vertical Mergers and Their Competitive Effects by : Yongmin Chen
Download or read book On Vertical Mergers and Their Competitive Effects written by Yongmin Chen and published by . This book was released on 2002 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: It is well known that vertical integration can change the pricing incentive of an upstream producer. However, it has not been noticed that vertical integration may also change the pricing incentive of a downstream producer and the incentive of a competitor in choosing input suppliers. I develop an equilibrium theory of vertical merger that incorporates these additional strategic considerations. Under fairly general conditions, a vertical merger will result in both efficiency gains and a collusive effect. The competitive effects of a vertical merger depend on the cost of switching suppliers and the degree of downstream product differentiation.
Book Synopsis Rivals' Exit and Vertical Merger Evaluation by : Javier D. Donna
Download or read book Rivals' Exit and Vertical Merger Evaluation written by Javier D. Donna and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We discuss a subset of vertical mergers, where the exercise of market power and the efficiencies enabled by a vertical merger reduce rivals' profits, making rivals' exit a potentially serious concern. Rivals' exit can fundamentally alter the welfare analysis of vertical mergers due to the reduction in product variety to consumers and the reduction in the number of competitors that would otherwise exert downward pricing pressure. An exit-inducing vertical merger might reduce welfare even if it is a welfare-enhancing merger absent exit. We present a theoretical framework to analyze vertical mergers that focuses on the possibility and consequences of exit, discuss the antitrust implications for merger evaluation, and provide examples. We argue that the possibility of rivals' exit should be an integral part of the analysis of vertical mergers.
Book Synopsis Vertical Mergers and Integration in Digital Markets by : John M. Yun
Download or read book Vertical Mergers and Integration in Digital Markets written by John M. Yun and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this chapter, we address three issues relating to vertical mergers and antitrust: (1) incorporating the elimination of double marginalization into the analysis of the likelihood of a unilateral price effect rather than treating it as a separate efficiencies defense; (2) recognizing, inter alia, the importance of reduced transaction costs in analyzing the efficiencies commonly associated with vertical mergers; and (3) highlighting that the weight of the empirical evidence continues to support the proposition that vertical mergers are less likely to generate competitive concerns than horizontal mergers.
Book Synopsis Vertical Mergers, Foreclosure and Raising Rivals' Costs - Experimental Evidence by : Hans-Theo Normann
Download or read book Vertical Mergers, Foreclosure and Raising Rivals' Costs - Experimental Evidence written by Hans-Theo Normann and published by . This book was released on 2010 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt:
