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On Vertical Mergers and Their Competitive Effects

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  • Yongmin Chen

    (University of Colorado at Boulder)

Abstract

It is well known that vertical integration can change an upstream producer's incentive to supply the integrated firm's downstream rivals. However, it has not been noticed that vertical integration also changes these rivals' incentive to choose suppliers. Once this is recognized, some important results in the literature are shown to be incorrect. An equilibrium theory of vertical merger is then developed. Under fairly general conditions, vertical mergers will result in both efficiency gains and market foreclosure (collusion), and a familiar measure concerning product differentiation can be used to evaluate whether a vertical merger tends to benefit or harm consumers.

Suggested Citation

  • Yongmin Chen, 2000. "On Vertical Mergers and Their Competitive Effects," Econometric Society World Congress 2000 Contributed Papers 0383, Econometric Society.
    • Handle: RePEc:ecm:wc2000:0383
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    References listed on IDEAS

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