[1] Vertical Mergers in Ecosystems with Consumer Hold-Up
with
Daniele Condorelli,
Jorge Padilla
Journal of Industrial Economics, 2024
[paper] [journal]
[abstract]
An ecosystem comprises all downstream products that employ a certain upstream input. In many cases, final consumers make irreversible investments to join an ecosystem before downstream prices are set. Our main observation is that, in contrast to conventional wisdom, an upstream monopolist merging with one of its downstream affiliates will find it profitable to continue to serve downstream competitors, even when products sold downstream are homogeneous.