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Product Market Competition and the Boundaries of the firm

Author

Listed:
  • Jean-Etienne de Bettignies

Abstract

This paper studies the effects of product market competition on vertical integration. In a duopoly setting, each retailer is associated with a manufacturer who must decide how to allocate property rights over the retail asset. Choosing delegation of property rights over vertical integration transfers incentives from the manufacturer to the retailer, and has the benefit of facilitating the creation of value, due to the retailer's superior efficiency. On the other hand it forces the manufacturer to forfeit part of the profits. We show how competition affects the equilibrium allocation of property rights in the industry, and discuss model applications

Suggested Citation

  • Jean-Etienne de Bettignies, 2004. "Product Market Competition and the Boundaries of the firm," Econometric Society 2004 North American Winter Meetings 248, Econometric Society.
    • Handle: RePEc:ecm:nawm04:248
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    Cited by:

    1. Bayo, Alberto & Galdon-Sanchez, Jose E. & Gil, Ricard, 2009. "The determinants of changes in the organization of production: Evidence from Spanish plant-level data," IESE Research Papers D/783, IESE Business School.
    2. Fernando Merino, 2017. "Offshoring, outsourcing and the economic geography of Europe," Papers in Regional Science, Wiley Blackwell, vol. 96(2), pages 299-323, June.
    3. ATM Adnan & Nisar Ahmed, 2019. "The Transformation Of The Corporate Governance Model: A Literature Review," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 8(3), pages 7-47.
    4. Barbara Spencer, 2005. "International outsourcing and incomplete contracts," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1107-1135, November.
    5. Bayo-Moriones, Alberto & Galdon-Sanchez, Jose Enrique & Gil, Ricard, 2013. "'Make-or-Buy' of Peripheral Services in Manufacturing: Evidence from Spanish Plant-Level Data," IZA Discussion Papers 7138, IZA Network @ LISER.
    6. Choi, Kangsik & Lee, DongJoon, 2017. "Welfare-improving vertical separation with network externality," Economics Letters, Elsevier, vol. 151(C), pages 115-118.
    7. Jen Baggs & Jean‐Etienne De Bettignies, 2007. "Product Market Competition And Agency Costs," Journal of Industrial Economics, Wiley Blackwell, vol. 55(2), pages 289-323, June.
    8. Galdon-Sanchez, Jose Enrique & Gil, Ricard & Bayo-Moriones, Alberto, 2015. "Outsourcing of peripheral services: Evidence from Spanish manufacturing plant-level data," European Economic Review, Elsevier, vol. 78(C), pages 328-344.
    9. Aekapol Chongvilaivan & Jung Hur, 2012. "Trade Openness and Vertical Integration: Evidence from the U.S. Manufacturing Sector," Southern Economic Journal, John Wiley & Sons, vol. 78(4), pages 1242-1264, April.

    More about this item

    Keywords

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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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