Upstream merger in a successive oligopoly: Who pays the price?

•Theoretical and empirical analysis of an upstream merger.•Theoretical predictions; higher prices paid by downstream firms, no price effect at consumer level.•Empirical findings; the merger led to i) higher average prices from the downstream to the upstream firms, ii) no effect on consumer prices. T...

Full description

Saved in:
Bibliographic Details
Published inInternational journal of industrial organization Vol. 48; pp. 143 - 172
Main Authors Nilsen, Øivind Anti, Sørgard, Lars, Ulsaker, Simen A.
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.09.2016
Elsevier Sequoia S.A
Subjects
Acquisitions & mergers
Food prices
Food processing industry
Non-linear prices
Oligopoly
Prices
Studies
Upstream merger
Vertical contracts
Norway
L41
K21
Non-linear prices
Upstream merger
Vertical contracts
Online AccessGet full text

Cover

More Information
Summary:•Theoretical and empirical analysis of an upstream merger.•Theoretical predictions; higher prices paid by downstream firms, no price effect at consumer level.•Empirical findings; the merger led to i) higher average prices from the downstream to the upstream firms, ii) no effect on consumer prices. This study applies a successive oligopoly model, with an unobservable non-linear tariff between upstream and downstream firms, to analyze the possible anti-competitive effects of an upstream merger in the Norwegian food sector (specifically, the market for eggs). The theoretical predictions are that an upstream merger may lead to higher average prices paid by downstream firms and at the same time no changes in the prices paid by consumers. Consistent with the theoretical predictions it is found that the merger had no effect on consumer prices, but led to higher average prices paid by the downstream firms to the merged firm.
ISSN:0167-7187
1873-7986
DOI:10.1016/j.ijindorg.2016.06.003