search query: @author Straume, O.R. / total: 4
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| Author: | Lommerud, K.E. Straume, O.R. Sorgard, L. |
| Title: | Downstream merger with upstream market power |
| Journal: | European Economic Review
2005 : APR, VOL. 49:3, p. 717-743 |
| Index terms: | Mergers Profitability Suppliers Trade unions Models Markets |
| Freeterms: | Cross-border |
| Language: | eng |
| Abstract: | This paper examines how a downstream merger (hereafter as: m.) affects input prices and, in turn, the profitability of a such a m. under Cournot competition with differentiated products. Input suppliers can be interpreted as ordinary upstream firms, or trade unions organizing workers. It is found that a m. is more profitable than in a corresponding model with exogenous input prices. It is also found that it can be more profitable to take part in a m. than being an outsider. For firm-specific input suppliers, on the other hand, results are reversed. The model is applied to endogenous m. formation in an international oligopoly, and shown that the equilibrium market structure is likely to be characterized by cross-border merger. |
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