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Bureau of Economics Federal Trade Commission

By Christopher Garmon


Abstract: In some cases, complementary products are sold to different sets of agents to aid in transactions between them. In the context of a simplified model, this paper shows that a monopolist has an incentive to integrate into and foreclose other sellers of a complementary product used in fixed proportions with the monopolized product, but which is sold to different consumers. While these latter consumers are made worse off by integration and leverage, output is expanded and the monopolist’s original consumers are made better-off. The effect of integration and leverage on overall welfare is uncertain. I illustrate this model with an example involving trucking fleet cards (sold to trucking companies) and fuel desk point-of-sale systems (sold to truck stops) that are used in conjunction when diesel fuel is purchased. 1 The views expressed in this paper are the author’s, not necessarily those of the Federal Trade Commission or any individual Commissioner. I would like to thank Denis Breen, David Reiffen, Michael Vita and two anonymous reviewers for their helpful comments and suggestions. Any remaining errors are my responsibilit

Year: 1999
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