The Entry Incentives of Complementary Producers: A Simple Model with Implications for Antitrust Policy
Juan S. Lleras and Nathan H. Miller, EAG 09-7, November 2009
We model competition between two firms in a vertical upstream-downstream
relationship. Each firm can pay a sunk cost to enter the others market.
For equilibria in which both firms enter, the downstream price can be lower than the
maximizing level, and coordination (e.g., through merger) is anticompetitive.