EDM: Merger specificity or alternative reality

December 21, 2021
merged chess pawns

In this article published in the December 2021 issue of the ABA Antitrust Magazine Online, Gopal Das Varma addresses two questions related to the pricing incentives of an independent upstream firm and those of a vertically integrated firm when two-part pricing is practically feasible. First, absent the merger, would an independent upstream firm that has market power have the incentive to offer two-part pricing contracts that eliminate double marginalization? Second, how does the use of two-part pricing affect the merged entity’s incentive to disadvantage rivals relative to when two-part pricing is not feasible? Answers to these questions are essential to determining whether two-part pricing can allow EDM to be realized without a merger but at the same time incentivize a merged entity to disadvantage rivals to the detriment of consumers.

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