TY - JOUR
T1 - On the competitive effects of multimarket contact
AU - Arie, Guy
AU - Markovich, Sarit
AU - Varela, Mauricio
N1 - Funding Information:
We thank seminar participants at Ben-Gurion University, Kellogg, Tel-Aviv University, UGA and Yale, and conference participants at the 2008 Israel Strategy Conference, 2010 ASSA, 2011 IIOC and Israel IO Day as well as Meghan Busse, David Dranove, Chaim Fershtman, Aaron Gellman, Gautam Gowrisankaran, Kei Hirano, Tom Hubbard, Mike Mazzeo, Michael Raith, William Rogerson, Mark Satterthwaite, Yossi Spiegel, Jeroen Swinkels, Michael Whinston and two anonymous referees for helpful comments. Arie gratefully acknowledges financial support by the Northwestern University Transportation Center Dissertation Year Fellowship and a Kellogg GM Center scholarship.
Publisher Copyright:
© 2017 Elsevier B.V.
Copyright:
Copyright 2020 Elsevier B.V., All rights reserved.
PY - 2017/11
Y1 - 2017/11
N2 - Changes in the extent of multi-market contact (MMC) between firms often affect market outcomes – quantities and prices. We show that a strategic but purely competitive effect of changes in MMC can change the quantity provided in a market by a firm by as much as 50%, and the prices a firm sets by as much as 20%. This may have important welfare implications, specifically with regards to horizontal mergers. Studying mergers that span several markets, we show that a myopic merger policy may thwart a surplus-increasing merger wave. The analysis does not rely on any tacit or explicit collusive behavior by the firms.
AB - Changes in the extent of multi-market contact (MMC) between firms often affect market outcomes – quantities and prices. We show that a strategic but purely competitive effect of changes in MMC can change the quantity provided in a market by a firm by as much as 50%, and the prices a firm sets by as much as 20%. This may have important welfare implications, specifically with regards to horizontal mergers. Studying mergers that span several markets, we show that a myopic merger policy may thwart a surplus-increasing merger wave. The analysis does not rely on any tacit or explicit collusive behavior by the firms.
KW - Horizontal mergers
KW - Multimarket contact
KW - Strategic complements
KW - Strategic substitutes
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U2 - 10.1016/j.euroecorev.2017.08.002
DO - 10.1016/j.euroecorev.2017.08.002
M3 - Article
AN - SCOPUS:85028721628
SN - 0014-2921
VL - 100
SP - 116
EP - 142
JO - European Economic Review
JF - European Economic Review
ER -