We employ a Cournot model with interdependent demands to explore the interaction between demand and cost complementarities in mitigating upward pricing pressure, post-merger. The analysis reveals that even substantial increases in the HHI post-merger need not raise competitive concerns when output is redistributed from single-market to multi-market providers. Furthermore, the numerical simulations indicate that there is a wide range of demand and cost complementarity parameters over which even monopolization of the market would not be expected to result in higher prices. These findings may constructively inform merger policy and provide useful context for application of the DOJ/FTC horizontal merger guidelines in an increasingly digitized (network) economy.
BetG.BlairR. D. (2019, November). Williamson’s welfare trade-off around the world. Review of Industrial Organization, 55(3), 515–533.
8.
BorkR. H. (1978). The antitrust paradox. Macmillan.
9.
Brown Shoe Co. v. United States, 370 U.S. 294 (1962).
10.
BruecknerJ. K.WhalenW. T. (2000, October). The price effects of international airline alliances. The Journal of Law and Economics, 43(2), 503–546.
11.
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488 (1977).
12.
BulowJ.GeanakoplosJ. D.KlempererP. D. (1985, June). Multimarket oligopoly: Strategic substitutes and complements. Journal of Political Economy, 93(3), 488–511.
13.
ChampsaurP.RochetJ. C. (1989, May). Multiproduct duopolists. Econometrica, 57(3), 533–557.
14.
Clayton Act, 15 U.S.C. § 18.
15.
DeGrabaP.RosstonG. J. (2014). The proposed merger of AT&T and T-Mobile: Rethinking possible. In KwokaJ. E.WhiteL. J. (Eds.), The antitrust revolution (Case 1, pp. 34–61). Oxford University Press.
16.
EconomidesN. (2008). Public policy in network industries. In BuccirossiP. (Ed.), Handbook of antitrust economics (chapter 13, pp. 469–518). The MIT Press.
17.
EvansD.KessidesI. (1993, February) Localized market power in the U.S. airline industry. The Review of Economics and Statistics, 75(1), 66–75.
KrepsD.ScheinkmanJ. (1983). Quantity precommitment and Bertrand competition yield Cournot outcomes. Bell Journal of Economics, 14, 326–337.
22.
LarsonA.LehmanD. E.WeismanD. L. (1990). A general theory of point-to-point long distance demand. In De FontenayA.ShugardM. H.SibleyD. S. (Eds.), Telecommunications demand modeling: An integrated view (pp. 299–318). North-Holland.
23.
PeltzmanS. (2014). Industrial concentration under the rule of reason. The Journal of Law and Economics, 57, 101–120.
24.
PosnerR. A. (2001). Antitrust law (2nd ed.). University of Chicago Press.
25.
ShyO. (2001). The economics of network industries. Cambridge University Press.
26.
ThorelliH. B. (1955). The federal antitrust law. The John Hopkins Press.
27.
United States v. Aluminum Co. of America, 148 F.2d 416, 428, 429 (2d Cir. 1945).
VivesX. (1999) Oligopoly Pricing. Cambridge MA: The MIT Press.
32.
WeismanD. L. (2003, October). A generalized pricing rule for multi-market Cournot oligopoly. Economics Letters, 81(1), 95–99.
33.
WeismanD. L. (2005, June). Market concentration, multi-market participation and mergers in network industries. The Review of Network Economics, 4(2), 129–141.
34.
WerdenG. J. (2014). Antitrust’s rule of reason: Only competition matters. Antitrust Law Journal, 79(2), 713–759.
35.
WilliamsonO. (1968, March). Economies as an antitrust defense: The welfare trade-offs. American Economic Review, 58(1), 18–34.
