Vertical Integration, Market Consolidation, and Economic Welfare

Dennis L. Weisman and Soheil R. Nadimi

A chapter in The Law and Economics of Patent Damages, Antitrust, and Legal Process, 2021, vol. 29, pp 55-67 from Emerald Group Publishing Limited

Abstract: We examine a setting in which a vertically integrated provider (VIP) initially has a duty to deal with an independent rival at unregulated upstream and downstream prices. The duty to deal is subsequently terminated which enables the VIP to acquire the independent rival (or the expertise necessary to produce the rival's product) and then serve as a two-product monopolist in the downstream market. We find that the refusal to deal decreases rivalry but increases economic efficiency and is therefore presumptively “pro-competitive.” The paramount policy question concerns whether a refusal to deal that eliminates a rival and monopolizes the downstream market while increasing static efficiency should be considered a violation of Section 2 of the Sherman Act. This analysis also has implications for policies governing the unbundling of next-generation telecommunications networks.

Keywords: Vertical integration; duty to deal; efficiency; antitrust; regulation; consumer welfare; L51; L96 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rlwezz:s0193-589520210000029004

DOI: 10.1108/S0193-589520210000029004

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