On the welfare impact of mergers of complements: Raising rivals’ costs versus elimination of double marginalization

Uğur Akgün, Cristina Caffarra, Federico Etro () and Robert Stillman

Economics Letters, 2020, vol. 195, issue C

Abstract: A common view in antitrust analysis is that mergers of complements can have raising rivals’ costs and elimination of double marginalization effects, with the net effect on consumer welfare thus unclear. We revise this view in the context of a merger between a monopolist in one market and a duopoly producer of a complement good. With linear demand and imperfect substitutability, while such a merger increases the price of the monopolized component, elimination of double marginalization dominates any raising rivals’ costs effects, increasing consumer welfare. We discuss a variety of extensions.

Keywords: Mergers; Raising rivals’ cost; Complements; Antitrust (search for similar items in EconPapers)
JEL-codes: L1 L4 L5 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:195:y:2020:i:c:s0165176520302676

DOI: 10.1016/j.econlet.2020.109429

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