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Equilibrium structures in vertical oligopoly

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Author Info
Masahiro Abiru (Fukuoka University, Japan)
Babu Nahata (University of Louisville, USA)
Subhashis Raychaudhuri (Fukuoka University, Japan)
Michael Waterson (University of Warwick, UK)

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Abstract

The central purpose of this paper is to examine vertical integration as an equilibrium phenomenon. We model it as integration between Cournot oligopolists in both the upstream and the downstream stages. We consider the issue of private profitability versus collective profitability and show that under several situations the equilibrium outcomes may result in a Prisoner's dilemma. The analysis is extended to consider equilibrium outcomes in a dynamic setting, where we find no integration to be a relatively common outcome.

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Publisher Info
Paper provided by EconWPA in its series General Economics and Teaching with number 0306010.

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Length: 18 pages
Date of creation: 26 Jun 2003
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Handle: RePEc:wpa:wuwpgt:0306010

Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on HP/PostScript; pages: 18 ; figures: included/request from author/draw your own
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Find related papers by JEL classification:
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Microeconomic Data
F49 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Other
R38 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - Government Policies; Regulatory Policies

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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.:
  1. Géarard Gaudet & Ngo Long, 1996. "Vertical Integration, Foreclosure, and profits in the Presence of Double Marginalization," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 5(3), pages 409-432, 09. [Downloadable!] (restricted)
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  2. Hart, O. & Tirole, J., 1990. "Vertical Integration And Market Foreclosure," Working papers 548, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Muris, Timothy J & Scheffman, David T & Spiller, Pablo T, 1992. "Strategy and Transaction Costs: The Organization of Distribution in the Carbonated Soft Drink Industry," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 1(1), pages 83-128, Spring.
  4. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August. [Downloadable!] (restricted)
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  5. Ordover, Janusz A & Saloner, Garth & Salop, Steven C, 1990. "Equilibrium Vertical Foreclosure," American Economic Review, American Economic Association, vol. 80(1), pages 127-42, March. [Downloadable!] (restricted)
  6. Alexander Schrader & Stephen Martin, 1998. "Vertical Market Participation," Review of Industrial Organization, Springer, vol. 13(3), pages 321-331, June. [Downloadable!] (restricted)
  7. Bonanno, Giacomo & Vickers, John, 1988. "Vertical Separation," Journal of Industrial Economics, Blackwell Publishing, vol. 36(3), pages 257-65, March. [Downloadable!] (restricted)
  8. Lin, Y Joseph, 1988. "Oligopoly and Vertical Integration: Note," American Economic Review, American Economic Association, vol. 78(1), pages 251-54, March.
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Cited by:
(explanations, 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.)

  1. Anette Boom & Stefan Buehler, 2007. "Restructuring Electricity Markets when Demand is Uncertain: Effects on Capacity Investments, Prices and Welfare," CIE Discussion Papers 2007-09, University of Copenhagen. Department of Economics. Centre for Industrial Economics. [Downloadable!]
  2. Jacques Thépot & Jean-Luc Netzer, 2007. "On the optimality of the full cost pricing," Working Papers of LaRGE (Laboratoire de Recherche en Gestion et Economie) 2007-05, Laboratoire de Recherche en Gestion et Economie, Université de Strasbourg (France). [Downloadable!]
    Other versions:
  3. Bühler, Stefan & Schmutzler, Armin, 2003. "Who Integrates?," CEPR Discussion Papers 4066, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  4. Stefania Borla, . "Horizontal and Vertial Integration in the Presence of Research Spillovers," Discussion Papers 04/12, Department of Economics, University of York. [Downloadable!]
  5. Arijit Mukherjee, 2002. "Licensing in a Vertically Separated Industry," Industrial Organization 0211005, EconWPA. [Downloadable!]
    Other versions:
  6. BELLEFLAMME, Paul & TOULEMONDE, Eric, 2004. "B2B marketplaces : Emergence and entry," CORE Discussion Papers 2004078, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  7. repec:bep:theadv:v:5:y:2005:i:1:p:1164-1164 is not listed on IDEAS
    Other versions:
  8. Arijit Mukherjee & Udo Broll & Soma Mukherjee, . "The welfare effects of entry: the role of the input market," Discussion Papers 08/12, University of Nottingham, School of Economics. [Downloadable!]
  9. Thomas Grandner, 2000. "A Note on Unionized Firms' Incentive to Integrate Vertically," Department of Economics Working Papers wuwp070, Vienna University of Economics and B.A., Department of Economics. [Downloadable!]
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