Product Market Competition and the Boundaries of the firm
AbstractThis paper studies the effects of product market competition on vertical integration. In a duopoly setting, each retailer is associated with a manufacturer who must decide how to allocate property rights over the retail asset. Choosing delegation of property rights over vertical integration transfers incentives from the manufacturer to the retailer, and has the benefit of facilitating the creation of value, due to the retailer's superior efficiency. On the other hand it forces the manufacturer to forfeit part of the profits. We show how competition affects the equilibrium allocation of property rights in the industry, and discuss model applications
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Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society 2004 North American Winter Meetings with number 248.
Date of creation: 11 Aug 2004
Date of revision:
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Competition; Vertical Integration; Incomplete Contracts;
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
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- Baggs, Jennifer & de Bettignies, Jean-Etienne, 2006. "Product Market Competition and Agency Costs," Analytical Studies Branch Research Paper Series 2006287e, Statistics Canada, Analytical Studies Branch.
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