Bargaining Monopolies Boost Profits and Consumer Surplus in Antitrust Policy
The article explores how complementary monopolies should impact antitrust merger policy. The researchers use a strategic model to show that when monopolists offer supply schedules and engage in bargaining with producers, a unique equilibrium is reached where joint profits are maximized. This equilibrium leads to output levels similar to those of a bundling monopoly. Contrary to the Cournot effect, complementary-input monopolists in this model choose prices that are not higher than those of a bundled monopoly. The analysis reveals that consumer and producer surpluses are higher with supply schedules and bargaining compared to posted-price competition, with implications for antitrust policies on vertical and conglomerate mergers.