The Entry Incentives of Complementary Producers: A Simple Model with Implications for Antitrust Policy
8 Pages Posted: 6 Nov 2009
Date Written: November 5, 2009
We model competition between two firms in a vertical upstream-downstream relationship. Each firm can pay a sunk cost to enter the other's market. For equilibria in which both firms enter, the downstream price can be lower than the joint profit maximizing level, and coordination (e.g., through merger) is anticompetitive.
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