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Vertical Coordination, Antitrust Law, and International Trade

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  • Hamilton, Stephen F
  • Stiegert, Kyle

Abstract

This paper demonstrates that vertically aligned private or public organizations are capable of generating strategic trade advantage similar to that acquired through direct government export subsidization. The model considers two forms of vertical coordination that lead to advantageous trade positions in international markets: upstream vertical restraint and downstream equity sharing. Such practices are commonly employed both by state trading agencies and by private firms in nations with lenient antitrust laws. The finding has important implications under new World Trade Organization (WTO) rules intended to reduce government intervention in international transactions. Recent reforms in the WTO favor nations that sanction highly refined vertical linkages between firms, while nations with stringent antitrust legislation have an incentive to negotiate for greater harmonization of international laws. Copyright 2000 by the University of Chicago.

Suggested Citation

  • Hamilton, Stephen F & Stiegert, Kyle, 2000. "Vertical Coordination, Antitrust Law, and International Trade," Journal of Law and Economics, University of Chicago Press, vol. 43(1), pages 143-156, April.
  • Handle: RePEc:ucp:jlawec:v:43:y:2000:i:1:p:143-56
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    File URL: http://dx.doi.org/10.1086/467450
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    References listed on IDEAS

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    6. Flath, David, 1989. "Vertical integration by means of shareholding interlocks," International Journal of Industrial Organization, Elsevier, vol. 7(3), pages 369-380.
    7. Flath, David, 1996. "The Keiretsu Puzzle," Journal of the Japanese and International Economies, Elsevier, vol. 10(2), pages 101-121, June.
    8. Li, David D & Li, Shan, 1996. " A Theory of Corporate Scope and Financial Structure," Journal of Finance, American Finance Association, vol. 51(2), pages 691-709, June.
    9. Kai-Uwe Kuhn, 1997. "Nonlinear Pricing in Vertically Related Duopolies," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 37-62, Spring.
    10. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-147, Supplemen.
    11. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-940, December.
    12. Lin, Y Joseph, 1988. "Oligopoly and Vertical Integration: Note," American Economic Review, American Economic Association, vol. 78(1), pages 251-254, March.
    13. Steven D. Sklivas, 1987. "The Strategic Choice of Managerial Incentives," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 452-458, Autumn.
    14. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
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    Citations

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    Cited by:

    1. Reimer, Jeffrey J. & Steigert, Kyle W., 2006. "Imperfect Competition and Strategic Trade Theory: What Have We Learned?," Working Papers 201528, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
    2. Stiegert, Kyle W. & Wang, Shinn-Shyr, 2003. "Imperfect Competition And Strategic Trade Theory: What Have We Learned," Working Papers 14589, International Agricultural Trade Research Consortium.
    3. Hamilton, Stephen F. & Stiegert, Kyle W., 2002. "An empirical test of the rent-shifting hypothesis: the case of state trading enterprises," Journal of International Economics, Elsevier, vol. 58(1), pages 135-157, October.
    4. Hamilton, Stephen F. & Requate, Till, 2004. "Vertical structure and strategic environmental trade policy," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 260-269, March.
    5. Fengxia Dong & Thomas L. Marsh & Kyle W. Stiegert, 2006. "State Trading Enterprises in a Differentiated Product Environment: The Case of Global Malting Barley Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 90-103.
    6. Reimer, Jeffrey J. & Stiegert, Kyle W., 2006. "Evidence on Imperfect Competition and Strategic Trade Theory," Staff Paper Series 498, University of Wisconsin, Agricultural and Applied Economics.
    7. Margherita Scoppola, 2007. "Economies of scale and market structure in international grain trade," Agricultural Economics, International Association of Agricultural Economists, vol. 37(2-3), pages 277-291, September.

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