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Unilateral Price Effects in Horizontal Mergers with Capacity Constraints

BY | April 28, 2026

This article reviews how capacity constraints affect unilateral price effects in horizontal mergers. When capacity constraints fall on merging firms, they mitigate price effects, whereas constraints on non-merging firms enhance...

This article reviews how capacity constraints affect unilateral price effects in horizontal mergers. When capacity constraints fall on merging firms, they mitigate price effects, whereas constraints on non-merging firms enhance price effects. Capacity constraints can be modeled as strict production limits, fuzzy acceptance, or upward marginal costs. Different models have different observable implications and data requirements, and can lead to different price effects. Guidance is provided to sele

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