Merger review with intermediate buyer power |
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| Affiliation: | 1. Department of Economics, University of Melbourne, Level 4, FBE Building, 111 Barry Street, Victoria 3010, Australia;2. Fuqua School of Business, Duke University, 100 Fuqua Drive, Durham, NC 27708, USA;1. Compass Lexecon, London, United Kingdom;2. Department of Economics, Penn State University, United States;3. Fuqua School of Business, Duke University, United States;4. Department of Economics, University of Mannheim, Germany;1. Department of Economics, University of Melbourne, Level 4, FBE Building, 111 Barry Street, Victoria 3010, Australia;2. The Fuqua School of Business, Duke University, 100 Fuqua Drive, Durham, NCn27708, USA;1. University of St. Gallen, SEPS-FGN, Varnbüelstr. 19, 9000 St. Gallen, Switzerland;2. University of Liverpool Management School, Chatham Street, Liverpool L69 7ZH, UK;1. Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai 200030, China;2. Department of Economics and the Interdisciplinary Center for Economic Science, George Mason University, Fairfax, VA 22030, USA |
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| Abstract: | Buyer power features prominently in antitrust cases and debates, particularly as it relates to the potential for a merger among suppliers to harm a buyer. Using a Myersonian mechanism design approach, Loertscher and Marx (2019b) provide a framework for merger review for markets with buyer power, assuming that buyer power is a zero-one variable. In the present paper, we extend this analysis by treating buyer power as a continuous variable (technically, as a Ramsey weight) that ranges from zero to one. This generalization is relevant because, among other reasons, the Ramsey weight can be interpreted as a conduct parameter that can be estimated. Moreover, we establish the robustness of prior results to an alternative way of modelling merger-related cost synergies, and we show that when an acquiring firm’s choice of target is endogenous, its profit-maximizing choice depends on the buyer’s power. |
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