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The impact of access to consumer data on the competitive effects of horizontal mergers and exclusive dealing
Author(s) -
Kim JinHyuk,
Wagman Liad,
Wickelgren Abraham L.
Publication year - 2018
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/jems.12285
Subject(s) - upstream (networking) , economic surplus , consumer welfare , marginal cost , business , industrial organization , microeconomics , vertical integration , welfare , competition (biology) , downstream (manufacturing) , economics , marketing , telecommunications , computer science , market economy , ecology , biology
We examine the influence of firms’ ability to employ individualized pricing on the welfare consequences of horizontal mergers. In a two‐to‐one merger, the merger reduces consumer surplus more when firms can price discriminate based on individual preferences compared to when they cannot. However, the opposite holds true in a three‐to‐two merger, in which the reduction in consumer surplus is substantially lower with individualized pricing than with uniform pricing. Further, the merger requires an even smaller marginal cost reduction to justify when an upstream data provider can make exclusive offers for its data to downstream firms. We also show that exclusive contracts for consumer data pose significant antitrust concerns independent of merger considerations. Implications for vertical integration and data mergers are drawn.