خریداران استراتژیک، ادغام افقی و هم افزایی: یک تحقیق تجربی

This paper reports an experiment designed to evaluate interrelationships between strategic buyers, market power and merger-induced synergies. The experiment consists of 40 posted-offer quadropolies. Treatments include the use of simulated or human buyers, seller consolidations and merger-induced fixed cost and unit cost synergies. In the simulated-buyer markets we observe behavior generally consistent with comparative static predictions: prices rise post-merger, and unit (but not fixed) cost synergies may exert some price-moderating effect. The addition of powerful buyers changes results markedly. Although prices are lower in the human buyer markets, outcomes are more variable and predicted comparative static effects are no longer observed.

Most standard treatments of oligopoly behavior assume that buyers are passive, full demand-revealing agents. Although this assumption conforms well to a number of industrial contexts, in other situations buyers are often quite concentrated. Indeed, as Inderst and Wey (2003) observe, following the emergence of large retail chains, buyer concentration has become a critical feature of the relationship between manufacturers and retailers. Commentators have long suggested that strategic buyer behavior might affect market outcomes. The idea of countervailing power dates at least to Galbraith (1952), who argued that powerful buyers might offset the effects of seller market power.2 Countervailing power is particularly important for horizontal merger policy. In the last decade, unilateral effects analysis has become an important focus of horizontal-merger enforcement in the United States.3 Central to unilateral effects analysis is the notion that merger-related market power concerns emanate from changes in the strategic situation facing sellers. However, the pertinent models (e.g., Deneckere and Davidson, 1985, Farrell and Shapiro, 1990 and Werden and Froeb, 1994) uniformly assume that buyers are passive. Powerful strategic buyers may affect importantly the predictions of such models. Not only may strategic buyers undermine seller market power both pre-merger and post-merger, they may also extract some or all of any merger-related synergies. In antitrust investigations, consolidating parties often argue that large buyers will expropriate merger-induced cost efficiencies, and then pass these savings along to consumers in the form of lower prices. Consolidating parties make these claims even if the efficiencies involve only unavoidable fixed costs.4 For example, in FTC v. Cardinal Health (1998) and FTC v. McKesson Corp. (1998), the third and first largest pharmaceutical wholesalers proposed to purchase, respectively, the second and the fourth largest wholesalers. The plaintiffs argued that the consolidations would generate hundreds of millions of dollars of merger-specific fixed-cost savings, the vast bulk of which would be passed along to consumers. An important part of the respondent's case was that the relevant market included very large buyers, and that the price reductions would be extracted by powerful buyers who would not settle for less. The effects of countervailing buyer power are not well understood either theoretically or empirically. Understandably, the United States Department of Justice and Federal Trade Commission Horizontal Merger Guidelines (1997) articulate no standard for identifying circumstances where buyers may be expected to counteract the anti-competitive effects of mergers. Courts in the United States, however, have not been entirely unsympathetic to arguments that countervailing power can offset the effects of increased seller concentration. For example, in United States v. Country Lake Foods, Inc. (1990), the court refused to enjoin a merger where three large customers accounted for 90% of all fluid milk sales in the relevant market.5 Some research also suggests that other countries are more receptive to the notion that countervailing power can balance increasing seller concentration. Dobson and Waterson (1997) contend that increased concentration in the British retail industry relative to that in the United States reflects a more sanguine view in Great Britain about the ameliorative effects of countervailing buyer power. This paper reports an experiment conducted to shed some light on the interrelationships between powerful buyers, market power, and merger-induced efficiencies. Laboratory methods present a useful way to generate insights into the effects of strategic buyers, for two reasons. First, for markets with strategic buyers, no counterpart to the standard Bertrand and Cournot models exists that is both analytically tractable, and describes the effects of withholding reasonably well. Adding strategic buyers complicates the analysis, because the potential for withholding obfuscates critical features of the underlying game, such as the price formation mechanism (bargaining, posted prices, etc.), the game's extensive form, and the appropriate information structure. Analyzing the possibility of strategic buyer withholding also requires the contemplation of repeated interactions, since foregoing purchases in one time period can only be rational if such behavior elicits more desirable prices in future periods. Experiments are a useful way to initiate theoretical research on these issues, as they have the potential to provide guidance to theorists about how such markets work. Second, inherent data problems impede the evaluation of interrelationships between mergers, synergies and strategic buyers with naturally occurring data. In natural contexts both costs and merger-associated cost synergies are observable only indirectly. A number of factors other than cost changes or changes in the strategic context induced by the merger may drive post-merger prices. The relevant dataset may also suffer from selection bias, as antitrust authorities often challenge the very cases that are of primary interest. In the laboratory, costs and the magnitude and type of cost savings can be controlled. All consolidations are legal and both market power and countervailing buyer behavior can be observed directly. As a preview, we find that in markets with passive (simulated) buyers standard theoretical predictions organize outcomes reasonably well. In these markets, prices tend to increase following consolidations, and synergies exert the predicted effects: fixed cost savings clearly do nothing to affect merger-induced market power changes, and, while the data are not unambiguous, some evidence suggests that unit cost synergies may exert a price-tempering effect. However, the addition of large human buyers changes market outcomes dramatically. Median prices in the large-buyer markets fall below median prices in the simulated-buyer markets both pre-merger and post-merger, and prices tend not to increase post-merger. Mean trading efficiency in the real buyer markets also falls, as buyers persistently forego profitable purchases in an effort to drive prices down. Finally, while considerable variability characterizes outcomes in the real-buyer markets, buyers do, in several instances extract the bulk of both fixed and unit cost synergies created by a consolidation. We organize the presentation as follows. Section 2 below reviews the related literature. Section 3 sketches out a simple model that motivates our experimental design, and serves as the foundation for our conjectures regarding experimental results. Section 4 describes the experimental design and procedures, and Section 5 presents our experimental results. We conclude with a brief sixth section.

This paper reports an experiment designed to assess the interrelationships between powerful buyers, mergers, and merger-induced synergies in a repeated Bertrand–Edgeworth context. Although human buyers appear to induce generally lower prices, we also find that the presence of human buyers generally undermines the comparative static predictions that follow from passive buyer models. Further, trading in the human buyer markets tends to be characterized by very considerable outcome variability, and by an overall reduction in trading efficiency. Naturally occurring markets are, of course, considerably more complex than the very simple structures considered here. Nevertheless, results of our experiments, we believe, tentatively offer two implications for antitrust policy. First, given powerful buyers, the predictions in standard unilateral-effects policy models no longer provide a reasonable basis for evaluating the consequences of a merger. Rather, policy variants of more sophisticated models, such as the model recently proposed by Inderst and Wey (2003) must be developed. The policy recommendations generated by such models will necessarily be more nuanced than those arising from unilateral effects analysis, because a variety of features typically excluded in current unilateral effects analysis, such as the curvature of the market surplus function, and current and feasible production technologies become important.39 We believe that this is an area where continued experimental research can play an important role, particularly given the subtlety of the pertinent theoretical predictions. At present we are preparing an analysis that parallels the present study, but in a bargaining context that more closely matches the assumptions regarding institutional trading rules typically made by theorists in intermediate goods markets. Second, in addition to the added complexity of these new models, our laboratory results suggest that outcomes in markets with thin buyer and seller sides may be both difficult to predict and may be characterized by considerable bargaining inefficiencies. Reducing a market to a small number of fully informed buyers and sellers changes the nature of interactions from decentralized market interactions to a relatively complex bargaining game. Outcomes in such markets may be expected to be determined more by the personalities and bargaining strengths of the relevant buyers and sellers, than by predictable underlying structural characteristics. Thus, while powerful buyers may ameliorate merger-induced market power increases, our results suggest that anticipating the effects of mergers in markets with real buyers may be even more difficult than in standard diffuse-buyer contexts.