A Note on Complementary Goods Mergers between Oligopolists with Market Power: Cournot Effects, Bundling and Antitrust

Antitrust policy in the US and EU toward non-horizontal mergers between oligopolists is based on a strong presumption of Cournot effects and/or improvements in consumer welfare through post-merger bundling. We show that complementary goods mergers between firms that possess market power in their respective components markets do not always assure either. The analysis underscores the importance of fully specifying the nature of premerger rivalry among all market participants and the assumed distribution of consumer preferences when making predictions about the likely effects of such transactions.