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On the Merits of Vertical Divestiture

  • David Sappington

    ()

This paper demonstrates that vertical divestiture may increase consumer welfare even when the divestiture eliminates substantial scope economies and precludes only limited sabotage. More generally, the merits of vertical divestiture are shown to vary with: (1) the type and the intensity of competition in the retail market; (2) the locus of scope economies under vertical integration; and (3) the relative social values of consumers’ surplus and profit. Copyright Springer Science+Business Media, LLC 2006

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File URL: http://hdl.handle.net/10.1007/s11151-006-9116-6
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Article provided by Springer in its journal Review of Industrial Organization.

Volume (Year): 29 (2006)
Issue (Month): 3 (November)
Pages: 171-191

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Handle: RePEc:kap:revind:v:29:y:2006:i:3:p:171-191
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100336

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  1. Beard, T Randolph & Kaserman, David L & Mayo, John W, 2001. "Regulation, Vertical Integration and Sabotage," Journal of Industrial Economics, Wiley Blackwell, vol. 49(3), pages 319-33, September.
  2. Reiffen, David & Schumann, Laurence & Ward, Michael R, 2000. "Discriminatory Dealing with Downstream Competitors: Evidence from the Cellular Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 48(3), pages 253-86, September.
  3. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, Elsevier.
  4. Wood, LisaV. & Sappington, DavidE.M., 2004. "On the design of performance measurement plans in the telecommunications industry," Telecommunications Policy, Elsevier, vol. 28(11), pages 801-820, December.
  5. Kaserman, David L & Mayo, John W, 1991. "The Measurement of Vertical Economies and the Efficient Structure of the Electric Utility Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 39(5), pages 483-502, September.
  6. Kondaurova, Irina & Weisman, Dennis L., 2003. "Incentives for non-price discrimination," Information Economics and Policy, Elsevier, vol. 15(2), pages 147-171, June.
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