Merger review with intermediate buyer power

Journal Article (Journal Article)

Buyer power features prominently in antitrust cases and debates, particularly as it relates to the potential for a merger among suppliers to harm a buyer. Using a Myersonian mechanism design approach, Loertscher and Marx (2019b) provide a framework for merger review for markets with buyer power, assuming that buyer power is a zero-one variable. In the present paper, we extend this analysis by treating buyer power as a continuous variable (technically, as a Ramsey weight) that ranges from zero to one. This generalization is relevant because, among other reasons, the Ramsey weight can be interpreted as a conduct parameter that can be estimated. Moreover, we establish the robustness of prior results to an alternative way of modelling merger-related cost synergies, and we show that when an acquiring firm's choice of target is endogenous, its profit-maximizing choice depends on the buyer's power.

Full Text

Duke Authors

Cited Authors

  • Loertscher, S; Marx, LM

Published Date

  • December 1, 2019

Published In

Volume / Issue

  • 67 /

International Standard Serial Number (ISSN)

  • 0167-7187

Digital Object Identifier (DOI)

  • 10.1016/j.ijindorg.2019.102531

Citation Source

  • Scopus