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Excess Entry, Vertical Integration, and Welfare

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  • Kai-Uwe Kuhn
  • Xavier Vives

Abstract

This article provides a systematic analysis of the welfare effects of vertical integration by a monopolist input supplier into a monopolistically competitive downstream industry. We give sufficient conditions on consumer preferences that lead to Pareto-improving vertical integration and demonstrate a close relationship between assumptions on preference for variety, excess entry in monopolistically competitive markets, and the welfare effects of vertical integration: Excess entry in downstream markets tends to give rise to Pareto-improving vertical integration. We extend the analysis to vertical oligopoly and access price regulation.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 30 (1999)
Issue (Month): 4 (Winter)
Pages: 575-603

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Handle: RePEc:rje:randje:v:30:y:1999:i:winter:p:575-603

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Cited by:
  1. Federico Boffa & John Panzar, 2012. "Bottleneck co-ownership as a regulatory alternative," Journal of Regulatory Economics, Springer, Springer, vol. 41(2), pages 201-215, April.
  2. María Fernanda Viecens, 2009. "Pricing strategies in two-sided platforms: The role of sellers’ competition," Working Papers 2009-11, FEDEA.
  3. ZHELOBODKO, Evgeny & KOKOVIN, Sergey & Parenti, Mathieu & THISSE, Jacques-François, . "Monopolistic competition beyond the constant elasticity of substitution," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -2488, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Gilles Chemla & Gilles Chemla, 2003. "Downstream Competition, Foreclosure and Vertical Integration," Post-Print, HAL halshs-00679847, HAL.
  5. PARENTI, Mathieu & ,, 2013. "Large and small firms in a global market: David vs. Goliath," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2013058, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Inderst, Roman & Wey, Christian, 2001. "Bargaining, Mergers and Technology Choice in Bilaterally Oligopolistic Industries," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2981, C.E.P.R. Discussion Papers.
  7. Zenger, Hans, 2009. "Successive Monopolies with Endogenous Quality," MPRA Paper 15659, University Library of Munich, Germany.
  8. Chemla, G., 1999. "Downstream Competition, Foreclosure, and Vertical Integration," Papers, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor. 99-18, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
  9. Swati Dhingra & John Morrow, 2012. "The Impact of Integration on Productivity and Welfare Distortions Under Monopolistic Competition," FIW Working Paper series, FIW 088, FIW.
  10. Hattori, Keisuke & Yoshikawa, Takeshi, 2013. "Free Entry and Social Inefficiency under Co-opetition," MPRA Paper 44816, University Library of Munich, Germany.

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