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28. Juni 2023

Brown Bag Seminar Industrial Economics

How Divestitures Affect Bargaining Power


28. Juni 2023
11:30 - 12:30
Francine D. Blau Room 3.3.002B+C


Yann Delaprez, European University Institute

This paper studies how bargaining power is affected by merger and divestiture policies. I provide a new empirical framework to compute bounds on brand-level bargaining weights using widely available sales data. Next, I exploit the variation in brand ownership caused by a large merger, cleared conditional on divestiture, in the U.S. deodorant market, to quantify the extent to which divestitures affect bargaining power thereby final prices and consumer surplus. I use the estimated model to simulate the upstream bargaining weights in the absence of a merger. Relative to this benchmark, I find that, on average, the upstream bargaining power associated with the divested brands increased and the upstream bargaining power of the merger decreased. Overall consumer surplus increased. Last, I simulate the effects of counterfactual divestiture packages on consumer surplus. A divestiture to the same buyer including less divested brands could have been consumer welfare-enhancing.


Yann Delaprez, European University Institute, Italy