Advanced Search
MyIDEAS: Login to save this article or follow this journal

Vertical mergers in procurement markets

Contents:

Author Info

  • Thomas, Charles J.

Abstract

This paper uses computational methods that reveal ambiguous strategic effects of vertical mergers in a duopoly setting featuring incomplete information about sellers' costs, and differences in sellers' productive capabilities. First, vertical mergers can be jointly unprofitable. Second, the buyer's preferred merger partner is almost always the seller with lower expected costs, and is typically the larger seller. Third, vertical mergers always reduce the unintegrated seller's profits, sometimes dramatically. Finally, vertical mergers can increase total welfare. Some of the results contrast qualitatively with unambiguous findings from models with symmetric sellers, which suggests that caution should be used in drawing general inferences from those models.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6V8P-50393KG-1/2/406c7add0bc3c8c437c723313b530214
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 29 (2011)
Issue (Month): 2 (March)
Pages: 200-209

as in new window
Handle: RePEc:eee:indorg:v:29:y:2011:i:2:p:200-209

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505551

Related research

Keywords: Vertical integration Incomplete information Imperfect competition Auctions Numerical methods;

References

References listed on IDEAS
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.:
as in new window
  1. Spulber, Daniel F, 1995. "Bertrand Competition When Rivals' Costs Are Unknown," Journal of Industrial Economics, Wiley Blackwell, vol. 43(1), pages 1-11, March.
  2. Hart, O. & Tirole, J., 1990. "Vertical Integration And Market Foreclosure," Working papers 548, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Lucy White, 2007. "Foreclosure with Incomplete Information," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(2), pages 507-535, 06.
  4. Rey, Patrick & Tirole, Jean, 2003. "A Primer on Foreclosure," IDEI Working Papers 203, Institut d'Économie Industrielle (IDEI), Toulouse, revised Nov 2005.
  5. Dalkir, Serdar & Logan, John W. & Masson, Robert T., 2000. "Mergers in symmetric and asymmetric noncooperative auction markets: the effects on prices and efficiency," International Journal of Industrial Organization, Elsevier, vol. 18(3), pages 383-413, April.
  6. Laurent Linnemer, 2003. "Backward Integration by a Dominant Firm," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(2), pages 231-259, 06.
  7. Lebrun, Bernard, 1999. "First Price Auctions in the Asymmetric N Bidder Case," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(1), pages 125-42, February.
  8. Roberto Burguet & Martin Perry, 2000. "Bribery and Favoritism by Auctioneers in Sealed Bid Auctions," Econometric Society World Congress 2000 Contributed Papers 1827, Econometric Society.
  9. Bikhchandani Sushil & Lippman Steven A. & Ryan Reade, 2005. "On the Right-of-First-Refusal," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 5(1), pages 1-44, April.
  10. Riordan, M.H., 1996. "Anticompetitive Vertical Integration by a Dominant Firm," Papers 64, Boston University - Industry Studies Programme.
  11. Bolton, Patrick & Whinston, Michael D, 1993. "Incomplete Contracts, Vertical Integration, and Supply Assurance," Review of Economic Studies, Wiley Blackwell, vol. 60(1), pages 121-48, January.
  12. Buehler Stefan & Schmutzler Armin, 2005. "Asymmetric Vertical Integration," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 5(1), pages 1-27, January.
  13. Ordover, Janusz A & Saloner, Garth & Salop, Steven C, 1990. "Equilibrium Vertical Foreclosure," American Economic Review, American Economic Association, vol. 80(1), pages 127-42, March.
  14. Salinger, Michael A, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, MIT Press, vol. 103(2), pages 345-56, May.
  15. Perry, Martin K., 1989. "Vertical integration: Determinants and effects," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 4, pages 183-255 Elsevier.
  16. R. Preston McAfee, 1999. "The effects of vertical integration on competing input suppliers," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 2-8.
  17. Bernard Lebrun, 2002. "Continuity of the first price auction Nash equilibrium correspondence," Economic Theory, Springer, vol. 20(3), pages 435-453.
  18. Roberto Burguet & Martin K. Perry, 2009. "Preferred suppliers in auction markets," RAND Journal of Economics, RAND Corporation, vol. 40(2), pages 283-295.
  19. Patrick Bajari, 2001. "Comparing competition and collusion: a numerical approach," Economic Theory, Springer, vol. 18(1), pages 187-205.
  20. Waehrer, Keith, 1999. "Asymmetric private values auctions with application to joint bidding and mergers," International Journal of Industrial Organization, Elsevier, vol. 17(3), pages 437-452, April.
  21. Lee, Joon-Suk, 2008. "Favoritism in asymmetric procurement auctions," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1407-1424, November.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Jeddy, Mohamed & Larue, Bruno, 2012. "Mergers, concurrent marketing mechanisms and the performance of sequential auctions," Working Papers 126945, Structure and Performance of Agriculture and Agri-products Industry (SPAA).

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:indorg:v:29:y:2011:i:2:p:200-209. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.