Vertical Mergers and Monopoly Leverage
Posted: 22 May 1998
Monopoly leverage involves using a monopoly in one market to achieve market power or monopoly in a second adjacent market. The concept of monopoly leverage has a long history in antitrust. Bowman, Bork , and other Chicago-school commentators successfully criticized the simple theory of monopoly leverage as failing to recognize that there may be only a single monopoly profit available to the monopolist, even if it integrates. More recent economic theories have addressed the single monopoly critique and have demonstrated a variety of circumstances in which monopoly leverage is a rational strategy that harms consumers. This contribution to the New Palgrave Dictionary of Economics and the Law sets out this analysis and a methodology for evaluating anticompetitive allegations involving monopoly leverage and vertical mergers.
JEL Classification: K21, L40
Suggested Citation: Suggested Citation