Unveiling Bargaining Impacts of Mergers and Divestitures (Job Market Paper)  

Young Researchers Best Paper Award CRESSE (2024)

Merger and divestiture policies influence bargaining power in vertical relationships, a commonly underestimated factor. I develop a Nash-bargaining model with endogenous bargaining weights. Next, I present a novel empirical framework to identify bounds on the upstream bargaining weights between manufacturers and retailers at the brand level and solve bias due to endogenous selection of divestiture packages. I analyze a landmark U.S. merger, approved conditional on divestiture, and its effect on bargaining power, final prices, and consumer surplus. Compared to a no-merger scenario, I estimate an increase in bargaining weights associated with divested brands and a decrease related to the brands of the merged entity. This shift contributes to an overall rise in consumer surplus. 

Can Merger Remedies Cause More Harm than Good? Accepted at The Journal of Law, Economics and Organization, Oxford University Press. 

This paper investigates whether merger remedies, such as divestitures, can cause more harm than good using a model of firm conduct. The model is estimated leveraging the variation generated by a large divestiture in the US beer market. First, I find that price coordination, materialized through conduct parameters, acts as a countervailing force that limits the pro-competitive effects of a divestiture. Price coordination eliminates about 80% to 133% of the welfare gains from a divestiture. Second, based on counterfactual simulations, I show that a merger cleared with divestiture is likely to reduce consumer surplus more than a merger approved without divestiture.

Merger Remedies and Bargaining Power in the Coffee Market (with M. Guignard) R&R at The Journal of Industrial Economics

EUI Second Year Paper Prize (2021)

This paper analyzes a merger of large manufacturers with divestiture in the French coffee market. In contrast to previous approaches used to study the effects of upstream divestitures on prices and welfare, we model the vertical market structure. First, our results show that the standard policy recommendation to require divestiture to small recipient firms may not hold when asymmetric bargaining power between firms is considered. Second, we show that previous models significantly overestimate costs. We estimate costs that are 12 percent lower, and find that divestiture can lead to marginal cost savings for the buyer of the divested brand.

Competition on Hybrid Platforms: Evidence from Amazon US (with V. Bramante, E. Calvano and G. Calzolari)

This paper provides causal evidence on the competitive effects of Amazon’s dual role as both a platform operator and retailer on its own marketplace. Leveraging data from over 9,000 staggered entries of Amazon as a first-party seller (FPS) across 18 product markets on Amazon US from 2018 to 2023, we analyze the impact of Amazon’s entry on prices, market shares, and seller behavior. We find that Amazon’s entry as an FPS results in a significant reduction in third-party sellers’ (3PS) buy box shares and buy box prices, although these effects exhibit substantial heterogeneity across categories. Our findings suggest that Amazon’s competitive advantage lies not only in pricing but also in leveraging its logistics arm, the Fulfilled by Amazon (FBA) program. Both FBA and Fulfilled by Merchant (FBM) sellers face diminished buy box shares following Amazon’s entry, though FBA sellers appear to be price-constrained and unable to lower their prices further. 

On Bargaining Power and the Inconsistencies Between Prices, Costs and Markups (with M. Guignard)

This article examines the relationships between prices, markups, and costs in the US shampoo market from 2002 to 2012. We find that real retail prices decreased during this period. This decline is not explained by a reduction in costs, but rather by an increase in retail bargaining power and a decrease in manufacturing markups. Additionally, we estimate a moderate increase in downstream markups. These results suggest that change in bargaining power is a key factor in understanding the evolution of markups and help to explain the inconsistencies between prices, costs and markups previously documented in the economic literature.

Work-in-Progress 

Artificial Intelligence and Competition (with V. Bramante, E. Calvano and G. Calzolari)

Understanding Prices and Markups Through the Evolution of Bargaining Power (with M. Guignard) 

Other Publications

Fusionskontrolle muss Verhandlungsmacht in Wertschöpfungsketten beachten (with M. Guignard), May 2024, DIW Wochenbericht, German Institute for Economic Research, vol. 91(22), pages 323-328.

Effectiveness of Horizontal Merger Remedies in Vertical Markets (with M. Guignard), March 2024, Concurrences N° 1-2024, Art. N° 116766, pp. 32-37