Merger review with intermediate buyer power

Loertscher, Simon; Marx, Leslie M.

doi:10.1016/j.ijindorg.2019.102531

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2021

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Cited by 6 publications

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“…They show that in the absence of cost synergies, a horizontal merger harms the buyer, regardless of buyer power. In a companion paper, Loertscher and Marx (2019b) introduce bargaining weights to model intermediate degrees of buyer power. More recently, Loertscher and Marx (2020a) develop a general bargaining model under incomplete information.…”

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confidence: 99%

Double Marginalization and Vertical Integration

2021

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Asymmetric information in procurement entails double marginalization. The phenomenon is most severe when the buyer has all the bargaining power at the production stage, while it vanishes when the buyer and suppliers' weights are balanced. Vertical integration eliminates double marginalization and reduces the likelihood that the buyer purchases from independent suppliers. Conditional on market foreclosure, the probability that final consumers are harmed is positive only if the buyer has more bargaining power when selecting suppliers than when negotiating over quantities and intermediate prices. The buyer's and consumers' interests are otherwise aligned.

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confidence: 99%