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Complements Integration and Foreclosure: The Case of Joint Consumption

Christopher Garmon

Southern Economic Journal, 2004, vol. 70, issue 4, 893-904

Abstract: In some cases, complementary products are sold to different sets of agents to aid in transactions between them. In the context of a simplified model, this article shows that a monopolist has an incentive to integrate into and foreclose other sellers of a complementary product used in fixed proportions with the monopolized product, but which is sold to different consumers. While these latter consumers are made worse off by integration and leverage, output is expanded and the monopolist's original consumers are made better off. The effect of integration and leverage on overall welfare is uncertain. I illustrate this model with an example involving trucking fleet cards (sold to trucking companies) and fuel desk point-of-sale systems (sold to truck stops) that are used in conjunction when diesel fuel is purchased.

JEL-codes: L12 L40 L92 (search for similar items in EconPapers)
Date: 2004
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Handle: RePEc:sej:ancoec:v:70:4:y:2004:p:893-904