We propose a simple model of a partially integrated industry which explicitly takes into account persistent production cost differences across upstream firms, such as one might observe in natural resource industries. The model allows us to highlight the respective roles of strategic considerations and of cost considerations in the determination of an integrated firm's interaction with the non- integrated sector of the industry and, in the end, on its relative upstream-downstream specialization. Stylized facts from the world oil industry are used to illustrate the type of behaviour one might expect in this context.
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Paper provided by Université Laval - Département d'économique in its series Cahiers de recherche with number
9604.
References listed on IDEAS 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.:
Salop, Steven C & Scheffman, David T, 1983.
"Raising Rivals' Costs,"
American Economic Review,
American Economic Association, vol. 73(2), pages 267-71, May.
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