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...

Farrell and Shapiro proposed a simple test of the possible upward pricing pressure (UPP) following a merger. They showed that the test may give false negatives, that is, indicate that a merger may not give an UPP, while a more comprehensive test would indicate the opposite. We show that their...

Merging firms regularly argue that mergers involving capacity-constrained firms are unlikelyto be anticompetitive, because a capacity-constrained firm does not represent a meaningful competitive constraint on its rivals. We construct a modified notion of upward pricing pressure called ccGUPPI,...