Capacity Constraints and Horizontal Merger Effects

This article examines how capacity constraints affect horizontal mergers. Binding capacity constraints for merging firms may mitigate merger price effects, but capacity constraints for nonmerging firms may either amplify or mitigate such effects. The presence of capacity constraints for both the merging and nonmerging firms in a market further complicates the analysis of merger price effects. Capacity constraints may also confound the relationship between market concentration and merger price effects. In addition, capacity constraints affect market definition analysis and analytical tools such as merger simulation and upward pricing pressure indexes. Analyzing the effects of capacity constraints on mergers continues to be a challenge for merger reviews