Working Paper: CEPR ID: DP7722
Authors: Volker Nocke; Lucy White
Abstract: In a repeated game setting of a vertically related industry, we study the collusive effects of vertical mergers. We show that any vertical merger facilitates upstream collusion, no matter how large (in terms of capacity or size of product portfolio) the integrated downstream buyer. But a vertical merger with a larger buyer helps more to facilitate upstream collusion than a similar merger with a smaller buyer. This formalizes the idea expressed in the U.S. and EU non-horizontal merger guidelines that some downstream buyers may be more "disruptive" of collusive schemes than others.
Keywords: antitrust; collusion; merger guidelines; vertical integration; vertical merger
JEL Codes: L13; L40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Vertical mergers (L22) | Upstream collusion (L12) |
| Larger downstream buyer (L14) | Facilitation of upstream collusion (L12) |
| Vertical mergers (L22) | Critical discount factor necessary for sustaining collusion (D43) |
| Outlet effect (D43) | Upstream collusion (L12) |
| Punishment effect (K42) | Upstream collusion (L12) |
| Vertical mergers (L22) | Net facilitation of collusion (D26) |