Complementary Monopolies and Bargaining

Research output: Working paper

Abstract

How should complementarities affect antitrust merger policy? I introduce a two-stage strategic model in which complementary input sellers offer supply schedules to producers and then engage in bilateral bargaining with producers. The main result is that there is a unique weakly dominant strategy equilibrium and the equilibrium attains the joint profit maximizing outcome. Output equals that of a bundling monopoly and total input prices are lower than prices with a bundling monopoly. The result holds with perfect competition in the downstream market. The result also holds with oligopoly competition in the downstream market. This implies that the Cournot Effect does not hold when companies negotiate supply contracts rather than using posted prices. The analysis has implications for antitrust policy towards vertical, conglomerate, and horizontal mergers.
Original languageEnglish (US)
PublisherSocial Science Research Network (SSRN)
Number of pages40
StatePublished - Jun 8 2016

Fingerprint

Monopoly
Bundling
Antitrust policy
Schedule
Cournot
Profit
Input prices
Dominant strategy
Horizontal mergers
Conglomerate
Perfect competition
Complementarity
Posted prices
Supply contracts
Oligopoly
Bilateral bargaining
Merger policy
Seller

Cite this

Spulber, D. F. (2016). Complementary Monopolies and Bargaining. Social Science Research Network (SSRN).
Spulber, Daniel F. / Complementary Monopolies and Bargaining. Social Science Research Network (SSRN), 2016.
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Spulber, DF 2016 'Complementary Monopolies and Bargaining' Social Science Research Network (SSRN).

Complementary Monopolies and Bargaining. / Spulber, Daniel F.

Social Science Research Network (SSRN), 2016.

Research output: Working paper

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Spulber DF. Complementary Monopolies and Bargaining. Social Science Research Network (SSRN). 2016 Jun 8.