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The entry incentives of complementary producers: A simple model with implications for antitrust policy

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  • Lleras, Juan S.
  • Miller, Nathan H.
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    Abstract

    We model competition between two firms in an upstream-downstream relationship. Each firm can pay a sunk cost to enter the other's market. We show that coordination (e.g., through merger) can be anticompetitive, and that such coordination can arise in equilibrium.

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    Bibliographic Info

    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 110 (2011)
    Issue (Month): 2 (February)
    Pages: 147-150

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    Handle: RePEc:eee:ecolet:v:110:y:2011:i:2:p:147-150

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    Web page: http://www.elsevier.com/locate/ecolet

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    Keywords: Vertical mergers Entry incentives Complementary products;

    References

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    1. Joseph Farrell and Michael L. Katz., 2000. "Innovation, Rent Extraction, and Integration in Systems Markets," Economics Working Papers E00-286, University of California at Berkeley.
    2. M. Keith Chen & Barry J. Nalebuff, 2006. "One-Way Essential Complements," Cowles Foundation Discussion Papers 1588, Cowles Foundation for Research in Economics, Yale University.
    3. Packalen, Mikko, 2010. "Complements and potential competition," International Journal of Industrial Organization, Elsevier, vol. 28(3), pages 244-253, May.
    4. Ramon Casadesus-Masanell & Barry Nalebuff & David B. Yoffie, 2007. "Competing Complements," Working Papers 07-44, NET Institute, revised Nov 2007.
    5. Leonard K. Cheng & Jae Nahm, 2007. "Product boundary, vertical competition, and the double mark-upproblem," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 447-466, 06.
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