Who Integrates?
30 Pages Posted: 14 Nov 2003
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: Suggested Citation
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