Competitive E?ects of Vertical Integration with Downstream Oligopsony and Oligopoly
AbstractWe analyze the competitive e?ects of backward vertical integration by a partially vertically integrated ?rm that competes with non-integrated ?rms both upstream and downstream. We show that vertical integration is procompetitive under fairly general conditions. It can be anticompetitive only if the ex ante degree of integration is relatively large. Interestingly, vertical integration is more likely to be anticompetitive if the industry is less concentrated. These results are in line with recent empirical evidence. In addition, we show that even when vertical integration is procompetitive, it is not necessarily welfare enhancing.
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Bibliographic InfoPaper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 278.
Date of creation: Oct 2009
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Vertical Integration; Downstream Oligopsony; Downstream Oligopoly; Competition Policy; Capacity Choice;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-10 (All new papers)
- NEP-COM-2009-10-10 (Industrial Competition)
- NEP-CSE-2009-10-10 (Economics of Strategic Management)
- NEP-IND-2009-10-10 (Industrial Organization)
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