IDEAS home Printed from
   My bibliography  Save this article

The effects of vertical integration on competing input suppliers


  • R. Preston McAfee


When a downstream firm buys an input supplier, it can reduce its costs of using that input. Other input suppliers typically respond by pricing more aggressively, given the demand reduction, which tends to lower input supply costs to other firms. Thus, a vertical merger may lower rivals' costs instead of raising them.

Suggested Citation

  • R. Preston McAfee, 1999. "The effects of vertical integration on competing input suppliers," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 2-8.
  • Handle: RePEc:fip:fedcer:y:1999:i:qi:p:2-8

    Download full text from publisher

    File URL:
    Download Restriction: no

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. repec:bin:bpeajo:v:21:y:1990:i:1990-3:p:205-286 is not listed on IDEAS
    2. Ordover, Janusz A & Saloner, Garth & Salop, Steven C, 1990. "Equilibrium Vertical Foreclosure," American Economic Review, American Economic Association, vol. 80(1), pages 127-142, March.
    3. Michael A. Salinger, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, Oxford University Press, vol. 103(2), pages 345-356.
    4. Salop, Steven C & Scheffman, David T, 1987. "Cost-Raising Strategies," Journal of Industrial Economics, Wiley Blackwell, vol. 36(1), pages 19-34, September.
    5. Hart, O. & Tirole, J., 1990. "Vertical Integration And Market Foreclosure," Working papers 548, Massachusetts Institute of Technology (MIT), Department of Economics.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Thomas, Charles J., 2011. "Vertical mergers in procurement markets," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 200-209, March.
    2. William P. Osterberg & James B. Thomson, 1999. "Banking consolidation and correspondent banking," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 9-20.
    3. McAndrews, James J. & Strahan, Philip E., 2002. "Deregulation, Correspondent Banking, and the Role of the Federal Reserve," Journal of Financial Intermediation, Elsevier, vol. 11(3), pages 320-343, July.
    4. Bhuyan, Sanjib, 2001. "Impact Of Vertical Mergers On Food Industry Profitability: An Empirical Evaluation," 2001 Annual meeting, August 5-8, Chicago, IL 20469, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Pei-Cheng Liao, 2010. "Discriminatory input pricing and strategic delegation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(4), pages 263-276.
    6. Kerem Cakirer, 2007. "A Fixed Effect Model of Endogenous Integration Decision and Its Competitive Effects," Working Papers 2007-18, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    7. Pei-Cheng Liao, 2014. "Input Prices as Signals of Costs to a Downstream Rival and Customer," The Japanese Economic Review, Japanese Economic Association, vol. 65(3), pages 414-430, September.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedcer:y:1999:i:qi:p:2-8. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (4D Library). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.