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Anticompetitive Vertical Integration by a Dominant Firm

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Author Info
Riordan, Michael H

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Abstract

Backward vertical integration by a dominant firm into an upstream competitive industry causes both input and output prices to rise. The dominant firm's advantage may or may not offset the negative effect of higher prices on social welfare. Whether it does depends on a simple indicator derived from input and output market shares and the degree of prior vertical integration. A vertical merger is similar to a hypothetical horizontal merger, suggesting that vertical merger policy for this industry should be similar to horizontal merger policy. The dominant firm model yields an observable sufficient indicator of welfare-improving vertical mergers. Copyright 1998 by American Economic Association.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 88 (1998)
Issue (Month): 5 (December)
Pages: 1232-48
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Handle: RePEc:aea:aecrev:v:88:y:1998:i:5:p:1232-48

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  1. Ramón Faulí-Oller & Joel Sandonís, 2003. "On The Competitive Effects Of Vertical Integration Under Product Differentiation," Working Papers. Serie AD 2003-31, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  2. Ali Hortacsu & Chad Syverson, 2006. "Cementing Relationships: Vertical Integration, Foreclosure, Productivity, and Prices," Working Papers 06-21, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
    Other versions:
  3. Hans-Theo Normann, 2004. "Equilibrium Vertical Foreclosure in the Repeated Game," Industrial Organization 0408008, EconWPA. [Downloadable!]
  4. Simon Loertscher, 2008. "Vertical mergers that eliminate double markups are procompetitive," Economics Bulletin, Economics Bulletin, vol. 4(22), pages 1-6. [Downloadable!]
  5. Juan Pablo Montero & Juan Ignacio Guzmán, 2005. "Welfare-Enhancing Collusion in the Presence of a Competitive Fringe," Documentos de Trabajo 298, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
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  6. Simon Loertscher & Markus Reisinger, 2009. "Competitive Effects of Vertical Integration with Downstream Oligopsony and Oligopoly," Discussion Papers 278, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
  7. Häckner, Jonas, 2001. "Vertical Integration and Competition Policy," Research Papers in Economics 2001:1, Stockholm University, Department of Economics.
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  8. Noriaki Matsushima & Tomomichi Mizuno, 2009. "Vertical Separation as a Defense against Strong Suppliers," ISER Discussion Paper 0755, Institute of Social and Economic Research, Osaka University. [Downloadable!]
  9. Douglas Cumming & Jeffrey MacIntosh, 2000. "The Determinants of R & D Expenditures: A Study of the Canadian Biotechnology Industry," Review of Industrial Organization, Springer, vol. 17(4), pages 357-370, December. [Downloadable!] (restricted)
  10. Yongmin Chen, 2000. "On Vertical Mergers and Their Competitive Effects," Econometric Society World Congress 2000 Contributed Papers 0383, Econometric Society. [Downloadable!]
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  11. Hans-Theo Normann, 2008. "Vertical Integration, Raising Rivals’ Costs and Upstream Collusion," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2008_30, Max Planck Institute for Research on Collective Goods. [Downloadable!]
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  12. Martin Gaynor & William B. Vogt, 1999. "Antitrust and Competition in Health Care Markets," NBER Working Papers 7112, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Martin Gaynor & Deborah Haas-Wilson, 1998. "Change, Consolidation, and Competition in Health Care Markets," NBER Working Papers 6701, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. Zava Aydemir & Stefan Buehler, 2002. "Estimating Vertical Foreclosure in U.S. Gasoline Supply," Working Papers 0212, University of Zurich, Socioeconomic Institute. [Downloadable!]
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  15. Augusto Rupérez Micola & Albert Banal Estañol & Derek W. Bunn, 2006. "Incentives and Coordination in Vertically Related Energy Markets," CIG Working Papers SP II 2006-02, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
    Other versions:
  16. Michael H. Riordan, 2005. "Competitive effects of vertical integration," Discussion Papers 0506-11, Columbia University, Department of Economics. [Downloadable!]
  17. repec:bep:theadv:v:5:y:2005:i:1:p:1164-1164 is not listed on IDEAS
  18. Volker Nocke & Lucy White, 2003. "Do Vertical Mergers Facilitate Upstream Collusion? Second Version," PIER Working Paper Archive 05-013, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 08 Mar 2005. [Downloadable!]
  19. Andrea Bonaccorsi & Paola Giuri, 2000. "The long term evolution of vertically-related industries," LEM Papers Series 2000/01, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy. [Downloadable!]
    Other versions:
  20. Stefan Buehler & Armin Schmutzler, 2003. "Downstream Investment in Oligopoly," Working Papers 0310, University of Zurich, Socioeconomic Institute. [Downloadable!]
    Other versions:
  21. Toshihiro Matsumura, 2003. "Strategic R and D investments with uncertainty," Economics Bulletin, Economics Bulletin, vol. 12(1), pages 1-7. [Downloadable!]
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