Simulation revolution in vertical mergers - Assessing vertical merger simulation as a merger screening tool

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bachelor_Alanya_Leo_2025.pdf (1.16 MB)

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School of Business | Bachelor's thesis
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Date

2025

Department

Taloustieteen laitos

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Mcode

Degree programme

Bachelor’s programme in Economics

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en

Pages

40 + 6

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Abstract

This thesis explores the potential role of vertical merger simulations as quantitative tools for merger regulation, focusing on the model developed by Sheu and Taragin (2021). While conventional tools like Vertical Arithmetic and vGUPPI offer partial equilibrium forecasts, simulation models seek to compute full post-merger equilibria, incorporating both upstream and downstream dynamics. The thesis critically examines the structure, assumptions, and applicability of the model by Sheu and Taragin (2021). Through analytical and comparative assessments, the thesis highlights the model’s strengths in capturing complex incentives and interactions between various efficiencies and harms arising from vertical mergers. However, it also identifies limitations of vertical merger simulation methods, particularly stemming from restrictive structural assumptions and simplified bargaining dynamics, as well as a limited scope. The findings suggest that while vertical merger simulations are a promising advancement over current screening methods, they should be used alongside other credible evidence and be tailored to specific market contexts to avoid misleading consumer welfare predictions.

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Thesis advisor

Toivanen, Otto

Keywords

vertical mergers, merger simulation, antitrust, industrial organization

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https://urn.fi/URN:NBN:fi:aalto-202505254026

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[kand] Kauppakorkeakoulu / BIZ (Open Access)