IDEAS home Printed from https://ideas.repec.org/p/frz/wpaper/wp2019_15.rdf.html

Mergers of Complements and Entry in Innovative Industries

Author

Listed:
  • Federico Etro

Abstract

I study a merger between producers of complement inputs facing potential entry, with investment by the incumbents in deterministic cost reduction and by the entrants in probabilistic innovation, and then competition in prices. The merger solves Cournot complementarity problems in investment and pricing, which is what makes it profitable but also potentially anti-competitive. When the demand is inelastic the merger harms consumers by reducing R&D of the entrants if the incumbents are efficient enough (always when bundling is adopted). Instead, with a demand elastic enough, the merger increases consumer surplus (even with bundling).

Suggested Citation

  • Federico Etro, 2019. "Mergers of Complements and Entry in Innovative Industries," Working Papers - Economics wp2019_15.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    • Handle: RePEc:frz:wpaper:wp2019_15.rdf
    as

    Download full text from publisher

    File URL: https://www.disei.unifi.it/upload/sub/pubblicazioni/repec/pdf/wp15_2019.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Brianna L. Alderman & Roger D. Blair & Javier D. Donna, 2025. "The Microsoft Acquisition of Activision: Neither Horizontal nor Vertical," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(7), pages 3713-3728, October.
    2. GAUTIER Axel, & LAMESCH Joe,, 2020. "Mergers in the digital economy," LIDAM Discussion Papers CORE 2020001, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Ramezzana, Paolo, 2025. "Entry deterrence, domino effects and mergers in markets for complements," International Journal of Industrial Organization, Elsevier, vol. 99(C).
    4. Brianna Alderman & Roger Blair & Javier Donna, 2025. "The Microsoft Acquisition of Activision: Neither Horizontal nor Vertical," Working Papers 359, Red Nacional de Investigadores en Economía (RedNIE).
    5. Yassine Lefouili & Leonardo Madio, 2026. "Mergers and investments : where do we stand ?," Post-Print hal-05543677, HAL.
    6. Tsuritani, Ryosuke, 2023. "Strategic Input Price Discrimination with Horizontal Shareholding," MPRA Paper 121176, University Library of Munich, Germany.
    7. Tsuritani, Ryosuke, 2025. "Common Ownership with Unlisted Suppliers of Perfectly Complementary Inputs," MPRA Paper 125003, University Library of Munich, Germany.
    8. Han, Tien-Der & Mukherjee, Arijit, 2023. "Mergers of complements, endogenous product differentiation and welfare," Mathematical Social Sciences, Elsevier, vol. 126(C), pages 30-41.
    9. Gautier, Axel & Lamesch, Joe, 2021. "Mergers in the digital economy," Information Economics and Policy, Elsevier, vol. 54(C).
    10. Akgün, Uğur & Caffarra, Cristina & Etro, Federico & Stillman, Robert, 2020. "On the welfare impact of mergers of complements: Raising rivals’ costs versus elimination of double marginalization," Economics Letters, Elsevier, vol. 195(C).
    11. Gaudin, Germain & Nagel, Niklas, 2025. "Merger of complements: Empirical evidence from the eyewear industry," International Journal of Industrial Organization, Elsevier, vol. 103(PA).
    12. Ryosuke Tsuritani, 2025. "Strategic input price discrimination with horizontal shareholding," Journal of Economics, Springer, vol. 145(1), pages 59-75, June.
    13. Kadner-Graziano, Alessandro S., 2023. "Mergers of Complements: On the Absence of Consumer Benefits," International Journal of Industrial Organization, Elsevier, vol. 89(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:frz:wpaper:wp2019_15.rdf. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Giorgio Ricchiuti (email available below). General contact details of provider: https://edirc.repec.org/data/defirit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.