Vertical Integration, Foreclosure and Profits in the Presence of Double Marginalisation
AbstractWhether vertical integration between a downstrean oligopolist and an upstream oligopolist is profitable for an integrated pair of firms is shown to depend on how one formulates the questions, on the number of firms in each oligopoly and on the type of interaction which is assumed between firms that are integrated and firms that are not. In particular, it is shown that if no restriction is put on trade between integrated and non integrated firms, integrated firms may continue to purchase inputs from the non integrated upstream firms, with the goal of raising their downstream rival's costs. Furthermore, even though firms are identical, asymmetric equilibria, where integrated and non integrated firms coexist, may actually arise as an outcome of the integration game. La rentabilitÃ© de l'intÃ©gration verticale entre une firme Ã l'amont et une firme Ã l'aval dÃ©pend de la maniÃ¨re de poser la question, du nombre de firmes et du type d'interaction entre les firmes intÃ©grÃ©es et les firmes non-intÃ©grÃ©es. Si l'on n'impose aucune contrainte sur les transactions entre les firmes intÃ©grÃ©es et les firmes non-intÃ©grÃ©es, alors les premiÃ¨res peuvent continuer Ã acheter l'input produit par les firmes non-intÃ©grÃ©es Ã l'amont afin de hausser les coÃ»ts des firmes non-intÃ©grÃ©es Ã l'aval. On montre que, mÃªme dans le cas oÃ¹ les firmes sont identiques, il y a des Ã©quilibres asymÃ©triques dans le jeu d'intÃ©gration.
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Bibliographic InfoPaper provided by Université du Québec à Montréal, Département des sciences économiques in its series Cahiers de recherche du Département des sciences économiques, UQAM with number 9308.
Date of creation: May 1993
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Other versions of this item:
- Géarard Gaudet & Ngo Long, 1996. "Vertical Integration, Foreclosure, and profits in the Presence of Double Marginalization," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(3), pages 409-432, 09.
- Gérard Gaudet & Ngo Van Long, 1995. "Vertical Integration, Foreclosure and Profits in the Presence of Double Marginalisation," CIRANO Working Papers 95s-40, CIRANO.
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