Merger review for markets with buyer power

Published

Journal Article

© 2019 by The University of Chicago. All rights reserved. We analyze the competitive effects of mergers in markets with buyer power. Using mechanism design arguments, we show that without cost synergies, mergers harm buyers, regardless of buyer power. However, buyer power mitigates the harm to a buyer from a merger of symmetric suppliers. With buyer power, a merger increases incentives for entry, increases investment incentives for rivals, and can increase investment incentives for merging parties. Because buyer power reduces the profitability of a merger, it increases the profitability of perfect collusion relative to a merger. Cost synergies can eliminate merger harm but also render otherwise profitable mergers unprofitable.

Full Text

Duke Authors

Cited Authors

  • Loertscher, S; Marx, LM

Published Date

  • December 1, 2019

Published In

Volume / Issue

  • 127 / 6

Start / End Page

  • 2967 - 3017

Electronic International Standard Serial Number (EISSN)

  • 1537-534X

International Standard Serial Number (ISSN)

  • 0022-3808

Digital Object Identifier (DOI)

  • 10.1086/702173

Citation Source

  • Scopus