Article | International Journal of Industrial Organization | 2010

Vertical Merger, Collusion, and Disruptive Buyers

by Volker Nocke and 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: Stock Options; Disruptive Innovation; Five Forces Framework; United States;

Citation:

Nocke, Volker, and Lucy White. "Vertical Merger, Collusion, and Disruptive Buyers." International Journal of Industrial Organization 28, no. 4 (2010): 350–354.