CRA congratulates Senior Consultant and Boston University Professor Michael Salinger and CRA Vice President Martino De Stefano for recently publishing two articles on vertical mergers: “The Complicated Simple Economics of Vertical Mergers” in The Journal of Law and Economics and “A Simultaneous Moves Approach to the Complicated Simple Economics of Vertical Mergers” in the Review of Industrial Organization.
In their models, even when a monopolist supplier of an input merges with one of two competing downstream firms, consumers almost always benefit. In addition, in many cases, the merged firm lowers the price it charges the rival downstream firm for the input. The authors introduce a useful new statistic that can identify the limited circumstances when vertical mergers might harm consumers: Net Downstream Pricing Pressure (“NDPP”).
