Who Integrates?

30 Pages Posted: 14 Nov 2003

See all articles by Stefan Buehler

Stefan Buehler

University of St. Gallen - SEPS: Economics and Political Sciences

Armin Schmutzler

University of Zurich - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: September 2003

Abstract

We examine vertical backward integration in oligopoly. Analysing a standard linear Cournot model, we find that for wide parameter ranges (i) some firms integrate, while others remain separated, and (ii) efficient firms are more likely to integrate vertically. Adopting a reduced-form approach, we identify a wholesale price effect and demand/mark-up complementarities as the driving forces for our results. We show that our results generalize beyond the Cournot example under fairly natural assumptions.

Keywords: Vertically-related oligopolies, vertical integration, efficiency, foreclosure

JEL Classification: L13, L22, L40, L82

Suggested Citation

Buehler, Stefan and Schmutzler, Armin, Who Integrates? (September 2003 ). CEPR Discussion Paper No. 4066 . Available at SSRN: https://ssrn.com/abstract=469182

Stefan Buehler

University of St. Gallen - SEPS: Economics and Political Sciences ( email )

FGN-HSG
Varnbuelstr. 19
CH-9000 St. Gallen
Switzerland
+41-71-224-2303 (Phone)

Armin Schmutzler

University of Zurich - Department of Economics ( email )

Zürich, CH-8006
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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