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The Entry Incentives of Complementary Producers: A Simple Model with Implications for Antitrust Policy

Juan Lleras () and Nathan Miller ()
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Juan Lleras: University of California, Berkeley
Nathan Miller: Economic Analysis Group, Antitrust Division, U.S. Department of Justice

No 200907, EAG Discussions Papers from Department of Justice, Antitrust Division

Abstract: We model competition between two firms in a vertical upstream-downstream relationship. Each firm can pay a sunk cost to enter the other’s market. For equilibria in which both firms enter, the downstream price can be lower than the joint profit maximizing level, and coordination (e.g., through merger) is anticompetitive.

Pages: 8 pages
Date: 2009-11
New Economics Papers: this item is included in nep-com and nep-ind
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