Economics, Econometrics and Finance
4 years ago

Monopolization threat: Mergers may limit software access, drive up prices.

Industrial Organization
Equilibrium Foreclosure and Complementary Products
Jeffrey Church, Neil Gandal

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The article explores how merging hardware and software companies can lead to monopolization and inefficiency in markets for complementary products. The researchers show that when a firm stops supplying software for a rival technology after a merger, it can result in monopolizing the hardware market. This practice, known as horizontal foreclosure, is found to be inefficient as total surplus would be higher without it.