Simulating mergers in a vertical supply chain with bargaining

by Gloria Sheu (US Department of Justice), Charles Taragin (US Department of Justice)

We model a two-level supply chain where Nash bargaining occurs upstream, while ﬁrms compete in a diﬀerentiated products logit setting downstream.The parameters of this model can be calibrated with a discrete set of data on prices, margins, and market shares. Using a series of numerical experiments, we illustrate how the model can simulate the outcome of both horizontal and vertical mergers. In addition, we extend the framework to allow for downstream competition via a second score auction.

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Year of publication:	October 2017
Authors:	Sheu, Gloria ; Taragin, Charles
Publisher:	[Washington, DC] : [U.S. Department of Justice]
Subject:	bargaining models \| merger simulation \| vertical markets \| Fusion \| Merger \| Lieferkette \| Supply chain \| Simulation \| Vertikale Integration \| Vertical integration \| Verhandlungstheorie \| Bargaining theory \| Verhandlungen \| Negotiations \| Lieferantenmanagement \| Supplier relationship management