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The Entry Incentives of Complementary Producers: A Simple Model with Implications for Antitrust Policy

Author

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  • Juan S. Lleras

    () (University of California, Berkeley)

  • Nathan H. Miller

    () (Economic Analysis Group, Antitrust Division, U.S. Department of Justice)

Abstract

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.

Suggested Citation

  • Juan S. Lleras & Nathan H. Miller, 2009. "The Entry Incentives of Complementary Producers: A Simple Model with Implications for Antitrust Policy," EAG Discussions Papers 200907, Department of Justice, Antitrust Division.
  • Handle: RePEc:doj:eagpap:200907
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