Mergers lead to more concentrated markets, which in turn can increase firms’ incentives to raise prices. Therefore, competition authorities utilise theoretical tools on order to assess the merging parties’ incentives for price increases – so-called Upward Pricing Pressure indices.
However, if a merger occurs between an upstream firm and its downstream competitor, the merger may lead to lower prices and better contracts for consumers. An eminent example of such a market is the telecom industry. In Norway, upstream network operators Telia, Telenor and ICE sell network access to its downstream competitors, with whom they compete for end-user purchases. Oslo Economics has developed the theoretical merger tools further, to assess the effects of mergers in these markets.
Read the full research article in the Review of Industrial Organization (DOI: 10.1007/s11151-017-9566-z), or use this link.
