Bargaining, bundling, and clout: The portfolio effects of horizontal mergers

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O'Brien, Daniel P. and Shaffer, Greg (2005) Bargaining, bundling, and clout: The portfolio effects of horizontal mergers. The RAND Journal of Economics, 36. pp. 573-595. ISSN 1756-2171

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Abstract

We examine the output and profit effects of horizontal mergers between differentiated upstream firms in an intermediate-goods market served by a downstream monopolist. If the merged firm can bundle, transfer pricing is efficient before and after the merger. Absent cost efficiencies, consumer and total welfare do not change. If the merged firm cannot bundle and its bargaining power is sufficiently high, transfer pricing is inefficient after the merger. Absent cost efficiencies, welfare typically falls. We evaluate the profit effects of mergers for the case of two-part tariff contracts. Rival firms gain (lose) from mergers that raise (lower) downstream prices. Contrary to conventional wisdom, a merger that harms the retailer may increase welfare.

Item Type:	Article
Faculty \ School:	Faculty of Social Sciences > Norwich Business School
Related URLs:	https://www.jstor.org/stable/4135230
Depositing User:	Nicola Secker
Date Deposited:	01 Apr 2011 15:49
Last Modified:	14 Nov 2024 00:35
URI:	https://ueaeprints.uea.ac.uk/id/eprint/27856
DOI:	issn:1756-2171

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