On the Merits of Vertical Divestiture
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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