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Forward Vertical Integration: The Fixed-Proportion Case Revisited

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  • Bonroy, Olivier
  • Larue, Bruno

Abstract

Assuming a fixed-proportion downstream production technology, partial forward integration by an upstream monopolist may be observed whether the monopolist is advantaged or disadvantaged cost-wise relative to fringe firms in the downstream market. Integration need not induce cost predation and the fringe firms’ margin may even increase. The output price falls and welfare unambiguously rises.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 65.

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Date of creation: Sep 2006
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Handle: RePEc:pra:mprapa:65

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Keywords: Vertical integration; cost predation; cost asymmetries;

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  1. Riordan, Michael H, 1998. "Anticompetitive Vertical Integration by a Dominant Firm," American Economic Review, American Economic Association, American Economic Association, vol. 88(5), pages 1232-48, December.
  2. Blair, Roger D. & Cooper, Thomas E. & Kaserman, David L., 1985. "A note on vertical integration as entry," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 3(2), pages 219-229, June.
  3. Quirmbach, Herman C, 1992. "Sequential Vertical Integration," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 107(3), pages 1101-11, August.
  4. Salop, Steven C & Scheffman, David T, 1987. "Cost-Raising Strategies," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 36(1), pages 19-34, September.
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Cited by:
  1. Bruno Larue & Olivier Bonroy, 2009. "Seemingly Competitive Food Retail Regulations: Who Do They Really Help?," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 57(3), pages 305-324, 09.

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