Wel-fare-improving Vertical Mergers in the Presence of Downstream Product Differentiation

Abstract

This paper investigates the welfare effect of a vertical merger in a market with downstream product differentiation. Previous studies find that a merger in this setting tends to be welfare-reducing if the merged firm exits the upstream market and the downstream goods are highly differentiated. The reason is that a reduction in the number of upstream suppliers raises the input price and lowers downstream production. This paper departs from previous studies by considering the case in which the merged firm continues to trade in the upstream market. A vertical merger is always procompetitive with this assumption change because, in this case, the merged firm sells inputs in the upstream market if the downstream goods are sufficiently differentiated.

本文探討下游異質競爭下的垂直結合的福利效果。過去的研究發現，如果下游產品的異質程度高，而且垂直結合後的廠商不再參與中間財市場的買賣，則垂直結合傾向於降低福利；原因是上游廠商家數的減少會提高中間財價格，從而減少下游的產出。本文與過去文獻不同之處在於假設垂直結合後的廠商會繼續在上游市場買賣中間财。在此假設下，垂直結合一定會提升福利；因為當下游產品的異質程度高時，垂直結合後的廠商會在上游市場賣出中間財。