Research Seminar at NUGSB with Andrey Tkachenko

Nazarbayev University Graduate School of Business is inviting you to attend Research Seminar with guest, Andre Tkachenko. Topic of the Seminar is Competitive Effects of Vertical Integration in Auctions.

Abstract: This paper studies the competitive effects of vertical integration between pharmaceutical drug producers and distributors in an auction setting. Utilizing data on 814,000 public procurement auctions in Russia, I identify the causal effect of vertical integration on the procurement prices of drugs. For drugs with few producers, vertical integration increases prices by 12%, while it decreases prices by 1.7% for drugs with many producers. I propose a model where distributors participating in a procurement auction negotiate with upstream producers. In the equilibrium, foreclosure explains the former empirical finding, while the exogenous synergy of the integration drives the latter effect. I use this model for the structural estimation of producer and distributor costs for drugs with two producers. Simulations show that a vertical merger with a synergy effect below 4% of the total cost harms the buyer. For a vertical merger with low synergy, the mandatory sharing of the production technology by the merging producer with a new independent firm is an effective remedy.

Location: Block C3, room 3037
Time: 12:30 PM
Date: March 1
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