The Impact of Horizontal Merger Between Manufacturers on Channel Pricing Behaviors

Abstract

This paper studies the impact of a horizontal merger between two manufacturers on channel pricing behaviors. We utilize the new empirical industrial organization approach in which demand and supply side behaviors are derived from economic theories. We apply our model to a

market data set obtained from the toilette paper category in which a major merger between Kimberly Clark and Scott happened. We find the impact of the merger on retailer-manufacturer interaction is heterogeneous across manufacturers. The merged manufacturer turns out to become tougher in its pricing. However, we do not find any evidence that the merge makes other manufacturers tougher.