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Economists tend to have reservations about the desirability of horizontal mergers but are less concerned about vertical mergers and agreements. It this sensible? What are the implications for regulatory policy?
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Economists tend to have reservations about the desirability of horizontal mergers but are less concerned about vertical mergers and agreements. It this sensible? What are the implications for regulatory policy? By Jaede Tan - March 2004 Horizontal mergers are generally seen as leading to an increase in concentration within markets, hence causing a fall in consumer welfare. For this reason, economists are traditionally worried about potential horizontal mergers, but not vertical mergers, which are generally seen as a means of increasing overall welfare. This black and white analysis of horizontal and vertical mergers is not true in all cases. There are instances where horizontal mergers actually lead to an increase in welfare, just as there are cases in which vertical mergers lead to a loss in welfare through vertical constraints. I will start by distinguishing the difference between a vertical and a horizontal merger, examining cases in both, where welfare can either...
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