Abstract
Mergers sometimes affect vertical relations between merging and non-merging firms. Vertically integrated non-merging firms may, for instance, lose its input sales to a downstream rival if the downstream rival merges with another vertically integrated firm. Thus, price responses from non-merging firms could go in the opposite direction to those of the merging parties. Consequently, estimates of unilateral price effects that do not account for these structural changes are incorrect. We extend the standard framework of unilateral price effects of horizontal mergers with linear demand to account for changes in vertical relations between merging and non-merging firms.
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