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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.

Suggested Citation

  • Bonroy, Olivier & Larue, Bruno, 2006. "Forward Vertical Integration: The Fixed-Proportion Case Revisited," MPRA Paper 65, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:65
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    File URL: https://mpra.ub.uni-muenchen.de/65/1/MPRA_paper_65.pdf
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    References listed on IDEAS

    as
    1. Riordan, Michael H, 1998. "Anticompetitive Vertical Integration by a Dominant Firm," American Economic Review, American Economic Association, vol. 88(5), pages 1232-1248, December.
    2. Salop, Steven C & Scheffman, David T, 1987. "Cost-Raising Strategies," Journal of Industrial Economics, Wiley Blackwell, vol. 36(1), pages 19-34, September.
    3. Blair, Roger D. & Cooper, Thomas E. & Kaserman, David L., 1985. "A note on vertical integration as entry," International Journal of Industrial Organization, Elsevier, vol. 3(2), pages 219-229, June.
    4. Herman C. Quirmbach, 1992. "Sequential Vertical Integration," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(3), pages 1101-1111.
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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, vol. 57(3), pages 305-324, September.

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    More about this item

    Keywords

    Vertical integration; cost predation; cost asymmetries;
    All these keywords.

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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