3/10/2006complementary market monopolization1 complementary market monopolization diagrams tim...
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3/10/2006
Complementary Market Monopolization 1
Complementary Market Monopolization diagrams
Tim Brennan
Professor, Public Policy and Economics, UMBCSenior Fellow, Resources for the Future
2006: T.D. MacDonald Chair, Competition Bureau, Industry Canada
3/10/2006
Complementary Market Monopolization 2
“Free Pass” for the first instance• Just one use of the doesn’t increase market power (outside of
very specific, non-robust models)
• Regulated industries exception
Bad Guy (3M) Rival (LePages)
Ret. 1 (CVS))
practice, e.g, ED, rebate
R2 (Staples) R3 R4 Inf. retailer
3/10/2006
Complementary Market Monopolization 3
More extensive raises concern• Adding another retailer starts to create the problem
• Horizontal expansion of control over complement market
Bad Guy (3M) Rival (LePages)
Ret. 1 (CVS))
practice, e.g, ED, rebate
R2 (Staples) R3 R4 Inf. retailer
3/10/2006
Complementary Market Monopolization 4
• Not just hypothetical monopolist
• Delineate comp.mkt.: Would SSNIP bring in inferior retailer?
At some point, acquire complement mkt. power
Bad Guy (3M) Rival (LePages)
Ret. 1 (CVS))
practice, e.g, ED, rebate
R2 (Staples) R3 R4 Inf. retailer
?
3/10/2006
Complementary Market Monopolization 5
Equivalent to merger in complement market• Effective linkage horizontal
• SLC depends on inferior retailer price, not bad guy cost
Bad Guy (3M) Rival (LePages)
Ret. 1 (CVS))
practice, e.g, ED, rebate
R2 (Staples) R3 R4 Inf. retailer