Single monopoly profits, vertical mergers, and downstream entry deterrence

Arbeitspapier

We review the Chicago school's single monopoly profit theory whereby an upstream monopolist cannot increase its profits through vertical integration as it has sufficient market power anyways. In our model the dominant supplier has full bargaining power and uses observable two-part tariffs. We show that, by vertically integrating with a downstream incumbent, the supplier can profitably commit to pricing more aggressively if a downstream entrant refuses its supply contract. This can deter welfare-enhancing entry. The anti-competitive effects arise from the seemingly pro-competitive elimination of double marginalization. We relate our model to hybrid platforms and, in particular, Apple's App store.

Object Details

• ISBN: 978-3-86304-372-8
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DICE Discussion Paper ; No. 373

Classification and Topics

• Classification: Wirtschaft ; Firm Organization and Market Structure ; Antitrust Issues and Policies: General ; Vertical Restraints; Resale Price Maintenance; Quantity Discounts
• Subject: double marginalization ; entry deterrence ; exclusive dealing ; foreclosure ; verticalmerger

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hunold, Matthias ; Schad, Jannika
• Event: Veröffentlichung
• (who): Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)
• (where): Düsseldorf
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/248249
• Last update: 10.03.2025, 11:43 AM CET