Rivals’ Exit and Vertical Merger Evaluation

Abstract We discuss a subset of vertical mergers, where the exercise market power and efficiencies enabled by merger reduce rivals’ profits, making exit potentially serious concern. Rivals’ can fundamentally alter welfare analysis mergers due to reduction in product variety consumers number competitors that would otherwise exert downward pricing pressure. An exit-inducing might even if it is welfare-enhancing absent exit. present theoretical framework analyze focuses on possibility consequences exit, antitrust implications for evaluation, provide examples. argue should be an integral part mergers.