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Marie-Laure Allain and Saïd Souam
''A note on horizontal mergers in vertically related industries''
( 2011, Vol. 31 No.1 )
We analyze horizontal mergers in vertically related industries. In a successive Cournot oligopoly model, we first compare the profitability of mergers in the upstream and in the downstream sectors. We characterize conditions on the concavities of the input supply function and the final demand function such that, ceteris paribus, an upstream merger is more protable than a downstream merger. We then provide a simple comparison of the relative losses of firms in an industry induced by a merger in the other sector when the degrees of concavity of the upstream and downstream demand functions are constant. We finally discuss the various mechanisms in action under non-constant degrees of concavity.
Keywords: horizontal mergers, vertically related industries, incentives to merge, elasticities of demand, loss from merger
JEL: D4 - Market Structure and Pricing: General
Manuscript Received : Feb 11 2010 Manuscript Accepted : Jan 06 2011

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