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Do Vertical Mergers Facilitate Upstream Collusion? Author info | Abstract | Publisher info | Download info | Related research | Statistics Volker Nocke
Lucy White
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We investigate the impact of vertical mergers on upstream firms' ability to collude when selling to downstream firms in a repeated game. We show that vertical mergers give rise to an outlets effect: the deviation profits of cheating unintegrated firms are reduced as these firms can no longer profitably sell to the downstream affiliates of their integrated rivals. Vertical mergers also result in an opposing punishment effect: integrated firms typically make more profit in the punishment phase than unintegrated upstream firms. The net result of these effects in an unintegrated industry is to facilitate upstream collusion. We provide conditions under which further vertical integration also facilitates collusion. (JEL D43, G34, L12, L13)
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Article provided by American Economic Association in its journal American Economic Review .
Volume (Year): 97 (2007)
Issue (Month): 4 (September)
Pages: 1321-1339
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Handle: RePEc:aea:aecrev:v:97:y:2007:i:4:p:1321-1339Contact details of provider: Email: Web page: http://www.aeaweb.org/aer/ More information through EDIRC
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Paper Volker Nocke & Lucy White, 2003.
"Do Vertical Mergers Facilitate Upstream Collusion? ,"
PIER Working Paper Archive
03-033, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
[Downloadable!] Nocke, Volker & White, Lucy, 2004.
"Do Vertical Mergers Facilitate Upstream Collusion? ,"
CEPR Discussion Papers
4186, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted) Lucy White & Volker Nocke, 2004.
"Do Vertical Mergers Facilitate Upstream Collusion? ,"
2004 Meeting Papers
45, Society for Economic Dynamics.
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references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
Ali Hortacsu & Chad Syverson, 2006.
"Cementing Relationships: Vertical Integration, Foreclosure, Productivity, and Prices ,"
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06-21, Center for Economic Studies, U.S. Census Bureau.
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Ali Hortacsu & Chad Syverson, 2007.
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NBER Working Papers
12894, National Bureau of Economic Research, Inc.
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George J. Mailath & Volker Nocke & Lucy White, 2004.
"When the Punishment Must Fit the Crime: Remarks on the Failure of Simple Penal Codes in Extensive-Form Games ,"
PIER Working Paper Archive
04-039, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
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Other versions: 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!]
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