The law and economics literature on the tragedy of the anticommons suggests that producers of complementary goods should integrate themselves. Recent decisions by the antitrust authorities seem to indicate that there is tradeoff between the “tragedy” and the lack of competition which might...

Revisions incorporated into the Horizontal Merger Guidelines in 2010 claim that the Department of Justice and the Federal Trade Commission consider anticompetitive effects to product “variety” when evaluating mergers. The Guidelines do not, however, explain the methodology or tools that can...

One of the most striking and undertheorized aspects of fields that commercialize patented technologies is the dynamic interplay of structural forces pushing toward consolidation. Of course, technological industries are complex ecosystems featuring numerous players of different sizes along the...

We study anti-competitive mergers in a dynamic model with noisy collusion. At each instant, firms either privately choose output levels or merge, which trades off benefits of avoiding price wars against the costs of merging. There are three results. First, mergers are optimal when collusion...

This paper develops a model that formalizes several connections between mergers, collusion and competition policy. In equilibrium, firms may merge to make collusion sustainable when it cannot be sustained with the original set of firms. A rise in the probability of detecting and prosecuting...

We study the effects of a vertical merger in a setting with a single upstream supplier of a critical input and two downstream customers which compete with each other. Initially, the upstream supplier first announces prices, then the two downstream customers announce their retail prices. We find...

Moresi and Salop (2013) have extended the “upward pricing pressure” approach used in analyzing horizontal mergers to the analysis of vertical mergers. They present test expressions called the vGUPPIu and vGUPPId to see if the upstream and downstream prices will rise as a result of the...

We extend the theory of bilateral vertical contracting to a double moral hazard setting where upstream and downstream firms make complementary investments that enhance demand, downstream firms make fixed investments to enter the downstream market, and contracts are private information and...

Antitrust practitioners are mis-applying simple vertical merger screening techniques (e.g., vertical foreclosure arithmetic, price pressure analysis) to reach flawed and internally inconsistent conclusions about vertical mergers. Specifically, practitioners have struck on a formula for claiming...

We examine the role of private information on the impact of vertical mergers. A vertical merger can improve the information that is available to an upstream monopolist because, after the merger, the monopolist can observe the cost of its downstream merger partner. In the pre-merger world,...