Complementarities as an Antitrust Defense
38 Pages Posted: 31 Mar 2020
Date Written: March 5, 2020
We employ a Cournot model with interdependent demands to explore the interaction between demand and cost complementarities in mitigating upward pricing pressure, post-merger. The analysis reveals that even substantial increases in the HHI post-merger need not raise competitive concerns when output is redistributed from single-market to multi-market providers. Furthermore, the numerical simulations indicate that there is a wide range of demand and cost complementarity parameters over which even monopolization of the market would not be expected to result in higher prices. These findings may constructively inform merger policy and provide useful context for application of the DOJ/FTC horizontal merger guidelines in an increasingly digitalized economy.
Keywords: mergers, concentration, oligopoly, complements, network industries
JEL Classification: L51, L96
Suggested Citation: Suggested Citation