Minhee Lee

Abstract: This paper examines the motivation behind vertical contracts, focusing on their interplay with upstream market structure. Changes in upstream market structure through mergers can incentivize exclusionary vertical agreements by altering product ownership and the profit gains from excluding rivals. I analyze the Connecticut beer market, where a dominant upstream manufacturer rewarded distributors if its share of sales volume in the distributor’s portfolio exceeds a certain threshold. I build a structural model that incorporates contract terms revealed through state regulations and federal antitrust enforcement to estimate demand, marginal costs, product entry costs, and pricing distortions under the reward program. Counterfactual analysis highlights the importance of firms' endogenous choice of vertical contracts, by evaluating a merger in which the dominant manufacturer acquires a craft manufacturer. The merger motivates the dominant manufacturer to adopt more aggressive exclusionary vertical contracts, as the portfolio expansion increases the substitutability between its products and those of rivals. I find that accounting for changes in vertical contracts results in a 42 percent greater consumer welfare loss after the merger.

Abstract: This paper studies mergers that facilitate the market expansion of acquired firms by lowering entry barriers. In such cases, merger evaluations that ignore endogenous entry decisions may substantially underestimate the merger's impact, as the acquired firms typically have a limited market presence before the merger. The analysis focuses on the acquisitions of craft breweries by mega-brewers in the U.S. beer industry. These craft breweries initially had a small footprint but expanded nationwide after gaining access to acquirers' resources. I develop an empirical model that accounts for endogenous product choices and estimates reductions in both fixed and marginal costs. Counterfactual analysis shows that ignoring product entry and merger-driven cost efficiencies leads to an incorrect prediction of no change in market outcomes or welfare. In contrast, when endogenous entry and cost reductions are considered, craft beer acquisitions increase consumer welfare by $60,714 per quarter in a representative market, by expanding product variety.

Abstract: This paper investigates whether mergers and acquisitions among U.S. water utilities improve drinking water quality. Although policymakers have encouraged consolidation to enhance infrastructure investment, there is limited empirical evidence on its effects on product quality. Using data from the Environmental Protection Agency's Safe Drinking Water Information System and a difference-in-differences framework with staggered treatment timing, I find that acquisitions by investor-owned water systems lead to 0.501 fewer health-related violations per year, compared to an annual average of 0.531 violations per system. This finding suggests that consolidation can generate quality-related efficiencies, supporting policies that encourage mergers and acquisitions in the public water sector.