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Vertical integration as a source of hold-up: an experiment

Author

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  • Marie-Laure Allain

    (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique)

  • Claire Chambolle

    (ALISS - Alimentation et sciences sociales - INRA - Institut National de la Recherche Agronomique, INRA - Institut National de la Recherche Agronomique)

  • Patrick Rey

    (GREMAQ - Groupe de recherche en économie mathématique et quantitative - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique, IDEI - Institut d'Economie Industrielle - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse)

  • Sabrina Teyssier

    (GAEL - Laboratoire d'Economie Appliquée de Grenoble - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UGA [2016-2019] - Université Grenoble Alpes [2016-2019], INRA - Institut National de la Recherche Agronomique)

Abstract

In a vertical chain in which two rivals invest before contracting with one of two competing suppliers, vertical integration can create hold-up problems for the rival. We develop an experiment to test this theoretical prediction in a setup in which suppliers can either pre commit ex ante to being greedy or degrade ex post the input they provide to their customer. Our experimental results confirm that vertical integration creates hold-up problems. However, vertical integration also generates more departures from theory, which can be explained by bounded rationality and social preferences.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Marie-Laure Allain & Claire Chambolle & Patrick Rey & Sabrina Teyssier, 2017. "Vertical integration as a source of hold-up: an experiment," Post-Print hal-02104564, HAL.
  • Handle: RePEc:hal:journl:hal-02104564
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    References listed on IDEAS

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    Cited by:

    1. Möllers, Claudia, 2016. "Reputation and foreclosure with vertical integration: Experimental evidence," DICE Discussion Papers 232, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

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    More about this item

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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