We challenge the view that the presence of powerful buyers stifles suppliers ́incentives to innovate. Following Katz (1987), we model buyer power as buyers ́ability to substitute away from a given supplier and isolate several effects that support the opposite view, namely that the presence of...

We present a model with firms selling (homogeneous) products in two imperfectly segmented markets (a "high-demand" and a "low-demand" market). Buyers are mobile but restricted by transportation costs, so that imperfect arbitrage occurs when prices differ in both markets. We show that equilibria...

We analyze horizontal mergers when the acquirer holds a passive partial ownership stake (PPO) in the target firm prior to the merger. We show that a PPO reduces the minimal synergy level necessary to make a merger beneficial for consumers. It follows that an antitrust authority ignoring existing...