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Vertical mergers and selective price cutting |
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| Authors: | Ronald N. Johnson Allen M. Parkman |
| Affiliation: | 1. Department of Agricultural Economics and Economics, Montana State University, 59717, Bozeman, MT, USA 2. Anderson Schools of Management, University of New Mexico, 87131, Albuquerque, NM, USA |
| Abstract: | A number of reasons have been offered for why businesses vertically merge. These include the facilitation of collusion and selective price cutting to circumvent rigid oligopolistic prices in upstream markets. This article presents a test of the second motive using data from the cement-concrete industries. Mergers in those industries are investigated because they were a controversial series of vertical mergers. The selective price cutting hypothesis is tested using ARIMA models with intervention components. Our results do not support that hypothesis. |
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