The Microsoft Acquisition of Activision: Neither Horizontal nor Vertical

Brianna Alderman, Roger Blair and Javier Donna
Additional contact information
Brianna Alderman: Harvard University
Roger Blair: University of Florida
Javier Donna: University of Miami

No 359, Working Papers from Red Nacional de Investigadores en Economía (RedNIE)

Abstract: We study the Microsoft-Activision acquisition through the lens of a complementary-product merger. When two complementary good producers consolidate, the merger is not horizontal because the two firms do not produce substitutable goods. Nor is the merger vertical, as neither firm supplies the other. We develop an economic model to study these types of mergers that allows for the possibility of rivals exiting the market. Three main conclusions flow from our analysis. (1) The welfare effects of the Microsoft-Activision acquisition are ambiguous; they depend on several industry factors. (2) One will not obtain the correct welfare effects using an incorrect vertical structure; harm to consumers will typically be larger in a complementary-product merger relative to a vertical one. (3) Consumer harm associated with rivals’ exit due to the merger might substantially reduce welfare even if it is a welfare-enhancing merger absent exit. Our analysis provides an analytical roadmap for the antitrust enforcement authorities regarding the theories of harm in complementary-good mergers.

Keywords: Antitrust; Competition Policy; Regulation; Complementary Mergers; Vertical Mergers; Merger Identification. (search for similar items in EconPapers)
JEL-codes: K21 K41 L13 L42 L44 L52 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2025-04
New Economics Papers: this item is included in nep-com, nep-ind, nep-law, nep-mic and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:aoz:wpaper:359

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