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Excess Entry, Vertical Integration and Welfare

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  • Kühn, Kai-Uwe
  • Vives, Xavier

Abstract

This paper provides a systematic analysis of the welfare effects of vertical integration by a monopolistic input supplier into a monopolistically competitive downstream industry. We give sufficient conditions on consumer preferences that lead to Pareto improving vertical integration. We demonstrate a close relationship between assumptions on preference for variety, excess entry in monopolistically competitive markets, and the welfare effects of vertical integration. Both excess entry and welfare improving vertical integration arise only if preference for variety falls as variety increases for given total output.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1293.

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Date of creation: Nov 1995
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Handle: RePEc:cpr:ceprdp:1293

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Related research

Keywords: Excess Entry; Preference for Variety; Vertical Integration;

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Cited by:
  1. Federico Boffa & John Panzar, 2012. "Bottleneck co-ownership as a regulatory alternative," Journal of Regulatory Economics, Springer, vol. 41(2), pages 201-215, April.
  2. Hattori, Keisuke & Yoshikawa, Takeshi, 2013. "Free Entry and Social Inefficiency under Co-opetition," MPRA Paper 44816, University Library of Munich, Germany.
  3. G. Chemla, 1999. "Downstream competition, foreclosure, and vertical integration," THEMA Working Papers 99-18, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  4. Inderst, Roman & Wey, Christian, 2003. " Bargaining, Mergers, and Technology Choice in Bilaterally Oligopolistic Industries," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 1-19, Spring.
  5. María Fernanda Viecens, 2009. "Pricing strategies in two-sided platforms: The role of sellers’ competition," Working Papers 2009-11, FEDEA.
  6. Evgeny Zhelobodko & Sergey Kokovin & Mathieu Parenti & Jacques‐François Thisse, 2012. "Monopolistic Competition: Beyond the Constant Elasticity of Substitution," Econometrica, Econometric Society, vol. 80(6), pages 2765-2784, November.
  7. PARENTI, Mathieu & ,, 2013. "Large and small firms in a global market: David vs. Goliath," CORE Discussion Papers 2013058, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Gilles Chemla & Gilles Chemla, 2003. "Downstream Competition, Foreclosure and Vertical Integration," Post-Print halshs-00679847, HAL.
  9. Swati Dhingra & John Morrow, 2012. "The Impact of Integration on Productivity and Welfare Distortions Under Monopolistic Competition," CEP Discussion Papers dp1130, Centre for Economic Performance, LSE.
  10. Zenger, Hans, 2009. "Successive Monopolies with Endogenous Quality," MPRA Paper 15659, University Library of Munich, Germany.

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