Vertical integration, knowledge disclosure and decreasing rival's cost
AbstractWe study vertical integration incorporating the fact that it creates the possibility of knowledge disclosure. We consider a setting where, through integrating, an upstream monopolist learns its downstream partner’s innovation, and can disclose it to its downstream rival. We show that a vertically integrated firm chooses to fully disclose its knowledge to its downstream rival. Knowledge disclosure intensifies downstream competition but, at the same time, expands the downstream market size. We also show that, due to knowledge disclosure, vertical integration increases firms’ innovation incentives, consumer and total welfare, and decreases, instead of raises, the rival’s cost.
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Bibliographic InfoPaper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we1213.
Date of creation: Apr 2012
Date of revision:
Vertical integration; R&D investments; Market floreclosure; Knowledge disclosure;
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
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-15 (All new papers)
- NEP-BEC-2012-05-15 (Business Economics)
- NEP-COM-2012-05-15 (Industrial Competition)
- NEP-INO-2012-05-15 (Innovation)
- NEP-KNM-2012-05-15 (Knowledge Management & Knowledge Economy)
- NEP-TID-2012-05-15 (Technology & Industrial Dynamics)
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.:
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