Manufacturers frequently pay fees to supermarkets when they temporarily reduce prices of their products. These funds are used by supermarkets to cover the costs of promotional campaigns and to compensate reductions in markups during promotions. Anecdotal evidence suggests that these fees are...

We study upstream horizontal mergers and their potential efficiency gains. We show that an upstream horizontal merger can give rise to two efficiency-enhancing effects when firms trade through two-part tariffs. It increases R&D investments and decreases wholesale prices when downstream...