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Author Info
Bühler, Stefan
Schmutzler, Armin

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Abstract

We examine vertical backward integration in oligopoly. Analysing a standard linear Cournot model, we find that for wide parameter ranges (i) some firms integrate, while others remain separated, and (ii) efficient firms are more likely to integrate vertically. Adopting a reduced-form approach, we identify a wholesale price effect and demand/mark-up complementarities as the driving forces for our results. We show that our results generalize beyond the Cournot example under fairly natural assumptions.

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Publisher Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4066.

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Date of creation: Sep 2003
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Handle: RePEc:cpr:ceprdp:4066

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Related research
Keywords: efficiency; foreclosure; vertical integration; vertically-related oligopolies;

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Find related papers by JEL classification:
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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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.:
  1. Chen, Yongmin, 2001. "On Vertical Mergers and Their Competitive Effects," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 667-85, Winter.
    Other versions:
  2. Salop, Steven C & Scheffman, David T, 1983. "Raising Rivals' Costs," American Economic Review, American Economic Association, vol. 73(2), pages 267-71, May. [Downloadable!] (restricted)
  3. Slade, Margaret E, 1998. "Beer and the Tie: Did Divestiture of Brewer-Owned Public Houses Lead to Higher Beer Prices?," Economic Journal, Royal Economic Society, vol. 108(448), pages 565-602, May. [Downloadable!] (restricted)
  4. Zava Aydemir & Stefan Buehler, 2002. "Estimating Vertical Foreclosure in U.S. Gasoline Supply," Working Papers 0212, University of Zurich, Socioeconomic Institute. [Downloadable!]
    Other versions:
  5. 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. [Downloadable!] (restricted)
  6. Bonanno, Giacomo & Vickers, John, 1988. "Vertical Separation," Journal of Industrial Economics, Blackwell Publishing, vol. 36(3), pages 257-65, March. [Downloadable!] (restricted)
  7. Rey, Patrick & Tirole, Jean, 2003. "A Primer on Foreclosure," IDEI Working Papers 203, Institut d'Économie Industrielle (IDEI), Toulouse, revised Nov 2005. [Downloadable!]
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  8. Esther Gal-Or, 1990. "Excessive Retailing at the Bertrand Equilibria," Canadian Journal of Economics, Canadian Economics Association, vol. 23(2), pages 294-304, May. [Downloadable!] (restricted)
  9. Abiru, Masahiro & Nahata, Babu & Raychaudhuri, Subhashis & Waterson, Michael, 1998. "Equilibrium structures in vertical oligopoly," Journal of Economic Behavior & Organization, Elsevier, vol. 37(4), pages 463-480, December. [Downloadable!] (restricted)
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  10. Jansen, Jos, 2003. "Coexistence of strategic vertical separation and integration," International Journal of Industrial Organization, Elsevier, vol. 21(5), pages 699-716, May. [Downloadable!] (restricted)
  11. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August. [Downloadable!] (restricted)
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  12. 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. [Downloadable!] (restricted)
  13. Slade, Margaret E, 1998. "Strategic Motives for Vertical Separation: Evidence from Retail Gasoline Markets," Journal of Law, Economics and Organization, Oxford University Press, vol. 14(1), pages 84-113, April.
  14. Stefan Buehler & Armin Schmutzler, 2003. "Downstream Investment in Oligopoly," Working Papers 0310, University of Zurich, Socioeconomic Institute. [Downloadable!]
    Other versions:
Full 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.)

  1. Dennis Gaertner & Daniel Halbheer, 2004. "Are There Waves in Merger Activity After All?," Working Papers 0414, University of Zurich, Socioeconomic Institute, revised Feb 2006. [Downloadable!]
    Other versions:
  2. Peter Zweifel & Harry Telser & Stephan Vaterlaus, 2005. "Consumer Resistance Against Regulation: The Case of Health Care," Working Papers 0505, University of Zurich, Socioeconomic Institute. [Downloadable!]
  3. Peter Zweifel, 2005. "The Purpose and Limits of Social Health Insurance," Working Papers 0509, University of Zurich, Socioeconomic Institute, revised Sep 2005. [Downloadable!]
  4. Stefan Boes & Markus Lipp & Rainer Winkelmann, 2005. "Money Illusion Under Test," Working Papers 0514, University of Zurich, Socioeconomic Institute. [Downloadable!]
    Other versions:
  5. G. Rossini, 2005. "Pitfalls in private and social incentives of vertical crossborder outsourcing," Working Papers 536, Dipartimento Scienze Economiche, Universita' di Bologna. [Downloadable!]
  6. Stefan Boes & Rainer Winkelmann, 2005. "Ordered Response Models," Working Papers 0507, University of Zurich, Socioeconomic Institute. [Downloadable!]
    Other versions:
  7. Stefan Buehler & Armin Schmutzler, 2003. "Asymmetric Vertical Integration," Working Papers 0306, University of Zurich, Socioeconomic Institute, revised Nov 2004. [Downloadable!]
    Other versions:
  8. Stefan Buehler & Armin Schmutzler, 2003. "Downstream Investment in Oligopoly," Working Papers 0310, University of Zurich, Socioeconomic Institute. [Downloadable!]
    Other versions:
  9. Armin Schmutzler, 2006. "A unified approach to comparative statics puzzles in experiments," Working Papers 0601, University of Zurich, Socioeconomic Institute, revised Nov 2008. [Downloadable!]
  10. Michael Breuer, 2004. "Optimal Insurance Contracts without the Non-Negativity Constraint on Indemnities Revisited," Working Papers 0406, University of Zurich, Socioeconomic Institute. [Downloadable!]
  11. Hans Gersbach & Armin Schmutzler, 2004. "Globalization and General Worker Training," Working Papers 0403, University of Zurich, Socioeconomic Institute. [Downloadable!]
  12. Harry Telser & Karolin Becker & Peter Zweifel, 2004. "Validity and Reliability of Willingness-to-Pay Estimates: Evidence from Two Overlapping Discrete-Choice Experiments," Working Papers 0412, University of Zurich, Socioeconomic Institute, revised Mar 2008. [Downloadable!]
  13. Harry Telser & Peter Zweifel, 2003. "Validity of Discrete-Choice Experiments - Evidence for Health Risk Reduction," Working Papers 0313, University of Zurich, Socioeconomic Institute, revised Feb 2005. [Downloadable!]
  14. Simon Loertscher & Yves Schneider, 2005. "Switching Costs, Firm Size, and Market Structure," Working Papers 0508, University of Zurich, Socioeconomic Institute. [Downloadable!]
    Other versions:
  15. Michael Breuer, 2004. "Deductible or Co-Insurance: Which is the Better Insurance Contract under Adverse Selection?," Working Papers 0401, University of Zurich, Socioeconomic Institute, revised Oct 2004. [Downloadable!]
  16. Gianpaolo Rossini, 2008. "Competition and bargaining in vertical relationships with market uncertainty," International Review of Economics, Springer, vol. 55(3), pages 229-242, September. [Downloadable!] (restricted)
  17. Boris Krey & Peter Zweifel, 2006. "Efficient Electricity Portfolios for Switzerland and the United States," Working Papers 0602, University of Zurich, Socioeconomic Institute. [Downloadable!]
  18. Stefan Buehler & Armin Schmutzler, 2005. "On The Role of Access Charges Under Network Competition," Working Papers 0501, University of Zurich, Socioeconomic Institute. [Downloadable!]
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