Market Power and Mergers in Durable-Good Industries

Abstract

THIS article investigates the effect on competition of mergers in industries that produce durable goods and shows how difficult it is to create market power through merger in a durable good industry.1 The implications of the analysis are that mergers in durable-good industries do not raise the same antitrust concerns as mergers in non-durable-good industries and, therefore, that it would be a mistake to blindly use the same type of analysis in a durable-good industry that has been developed to analyze mergers in a non-durable-good industry. Our results are separate from those in the recent theoretical literature on a durable-good monopolist and instead depend on the nature of competition in a dynamic setting with used goods.2 The implication of recent theoretical work following Coase is that one may not have to worry about monopoly or its creation through merger in durable-good industries. The reason has to do with the inability of the