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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.

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.

Suggested Citation

  • Lleras, Juan S. & Miller, Nathan H., 2011. "The entry incentives of complementary producers: A simple model with implications for antitrust policy," Economics Letters, Elsevier, vol. 110(2), pages 147-150, February.
  • Handle: RePEc:eee:ecolet:v:110:y:2011:i:2:p:147-150
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    References listed on IDEAS

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    1. M. Keith Chen & Barry J. Nalebuff, 2006. "One-Way Essential Complements," Cowles Foundation Discussion Papers 1588, Cowles Foundation for Research in Economics, Yale University.
    2. Ramon Casadesus-Masanell & Barry Nalebuff & David B. Yoffie, 2007. "Competing Complements," Working Papers 07-44, NET Institute, revised Nov 2007.
    3. Farrell, Joseph & Katz, Michael L, 2000. "Innovation, Rent Extraction, and Integration in Systems Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 48(4), pages 413-432, December.
    4. 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, June.
    5. Packalen, Mikko, 2010. "Complements and potential competition," International Journal of Industrial Organization, Elsevier, vol. 28(3), pages 244-253, May.
    6. M. Keith Chen & Barry J. Nalebuff, 2006. "One-Way Essential Complements," Cowles Foundation Discussion Papers 1588, Cowles Foundation for Research in Economics, Yale University.
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