The Welfare Effects of Vertical Mergers and their Remedies

This paper extends Williamson’s ( 1968 , 58(1):p. 18–36) classic framework of the welfare effect of mergers to the case of vertical mergers, and in particular to those in which the imposition of merger conditions (remedies) may allow an otherwise anticompetitive merger to proceed. While similarities...

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Bibliographic Details
Published in:Review of industrial organization 2021-09, Vol.59 (2), p.409-441
Main Authors: Mayo, John W., Whitener, Mark
Format: Article
Language:English
Subjects:
Acquisitions & mergers
Economic welfare
Economics
Economics and Finance
Imposition
Industrial Organization
Mergers
Microeconomics
Welfare services
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Summary:This paper extends Williamson’s ( 1968 , 58(1):p. 18–36) classic framework of the welfare effect of mergers to the case of vertical mergers, and in particular to those in which the imposition of merger conditions (remedies) may allow an otherwise anticompetitive merger to proceed. While similarities to the case of horizontal mergers without a remedies option are present, differences also arise. Most notably: For prototypical vertical mergers, remedies may yield post–merger economic welfare that is higher than pre–merger levels. This suggests that remedies that are directed toward vertical mergers hold the promise of a more beneficial approach than in the case of horizontal mergers.
ISSN:0889-938X
1573-7160
DOI:10.1007/s11151-021-09829-8