Vertical integration with incomplete information
Speaker: Prof Simon Loertscher
Affiliation: University of Melbourne
Location: Room 629, Level 6, Colin Clark Bld #39, UQ St Lucia Campus.
Online via Zoom: https://uqz.zoom.us/j/84030975989
Abstract
This paper derives the social surplus maximizing vertical merger policy for an incomplete information model in which the upstream market structure affects the efficiency of the intermediate good market. This policy allows some mergers to pass unopposed, imposes divestiture remedies on others, and blocks the remaining ones. With ex ante identical firms, more symmetric upstream market structures are better. If vertical mergers consist of bilateral transactions of resources that occur at the ex ante stage, then a laissez-faire policy maximizes social surplus if there are two firms but, because of bargaining externalities, typically not with more firms. If the upstream market structure permits the intermediate good market to operate efficiently, firms' investment incentives are aligned with the first-best. Assuming the intermediate good improves the quality of the product that each firm sells in its downstream market, consumer and social surplus maximization are equivalent if the pass-through is the same across markets.
About the presenter's meeting
Professor Loertscher will be visiting the School of Economics on Tuesday 20th September. If you would like to meet with him, please contact Dr Carlos Oyarzun
About Economic Theory Seminar Series
A seminar series designed specifically for economic theory researchers to network and collaborate.
