The Price Effects of Using Firewalls as an Antitrust Remedy

The Price Effects of Using Firewalls as an Antitrust Remedy Antitrust authorities have imposed firewalls between the previously separate divisions of newly vertically integrated firms in several industries, to address concerns that access to horizontal rivals’ proprietary information may reduce competition. This paper evaluates a specific antitrust concern by modeling the price effect of one seller’s learning its rival’s production costs before bidding in a duopoly procurement contest. The results show that imposing a firewall as a condition for permitting a vertical merger actually can lead to higher prices than if the flow of information were unimpeded, and they provide guidance as to when this unintended outcome occurs. Review of Industrial Organization Springer Journals

The Price Effects of Using Firewalls as an Antitrust Remedy

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Springer US
Copyright © 2011 by Springer Science+Business Media, LLC.
Economics; Industrial Organization; Microeconomics
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  • Vertical integration and proprietary information transfers
    Hughes, J.; Kao, J.
  • Bertrand competition under uncertainty
    Janssen, M.; Rasmusen, E.

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