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Merger Control in Retail Markets with National Pricing

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121

Abstract

We theoretically examine the impact of retail chains’ pricing policies on the efficiency of structural remedies in retail merger control. Under local pricing, divestiture of stores can fully remedy retail mergers in our model. However, if chains implement national (uniform) pricing, these remedies become less effective and potentially counterproductive. Moreover, remedies under national pricing may perform even worse if chains also compete locally on nonprice factors like quality and service. This suggests that competition authorities should block a larger share of the mergers under national pricing, instead of conditionally approving them subject to structural remedies, simply because the available remedies are less effective than those with local pricing.

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