EMPIRICAL EVIDENCE ON ON VERTICAL FORECLOSURE

Recent papers have shown conditions under which vertical mergers can result in anticompetitive foreclosure of unintegrated rivals. One implication of these models is that a necessary condition for anticompetitive foreclosure is that unintegrated rival firms are less profitable after a vertical merge...

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Bibliographic Details
Published in:Economic inquiry 1994-04, Vol.32 (2), p.303-317
Main Authors: Rosengren, Eric S., Meehan JR, James W.
Format: Article
Language:English
Subjects:
Acquisitions & mergers
Analysis
Competition
Conglomerate corporations
Economic models
Economic theory
Foreclosure
Hypotheses
Stock prices
Studies
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Summary:Recent papers have shown conditions under which vertical mergers can result in anticompetitive foreclosure of unintegrated rivals. One implication of these models is that a necessary condition for anticompetitive foreclosure is that unintegrated rival firms are less profitable after a vertical merger. We test this hypothesis by examining the stock prices of unintegrated rivals at the time of a vertical merger announcement and at the time of a government antitrust complaint. We find no evidence to support the foreclosure hypothesis.
ISSN:0095-2583
1465-7295
DOI:10.1111/j.1465-7295.1994.tb01331.x