Abstract
This paper examines the additional social harm done by mergers in input markets that lead to higher prices, when those increases are then passed downstream through other distribution stages that are themselves imperfectly competitive. It is shown that measures of deadweight loss coming from simply looking at the (derived) upstream demand curve – as usually done in merger cases – can greatly understate the true deadweight loss generated through the distribution channel. These results have important implications for competition authorities reviewing mergers, particularly when they trade off the harm to competition (added deadweight loss) and merger-generated efficiencies.
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