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Input Production Joint Venture

Author

Listed:
  • Gianpaolo Rossini

    (University of Bologna)

  • Cecilia Vergari

    (University of Bologna)

Abstract

In many industries it is quite common to observe firms delegating the production of essential inputs to independent ventures jointly established with competing rivals. The diffusion of this arrangement and the favourable stance of competition authorities call for the assessment of the social and private desirability of Input Production Joint Ventures (IPJV), which represent a form of input production cooperation, not investigated so far. IPJV can be seen as an intermediate organizational setting lying between the two extremes of vertical integration and vertical separation. Our investigation is based on an oligopoly model with horizontally differentiated goods. We characterize the conditions under which IPJV is privately optimal finding that firms’ incentives may be welfare detrimental. We also provide a rationale for the empirical relevance of IPJV both in terms of its ability to survive and in terms of disengagement incentives.

Suggested Citation

  • Gianpaolo Rossini & Cecilia Vergari, 2009. "Input Production Joint Venture," Working Papers 2009.89, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2009.89
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    References listed on IDEAS

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    Cited by:

    1. Brito, Duarte & Cabral, Luís M B & Vasconcelos, Helder, 2016. "Competitive Effects of Partial Control in an Input Supplier," CEPR Discussion Papers 11397, C.E.P.R. Discussion Papers.
    2. Gianpaolo Rossini & Cecilia Vergari, 2014. "The Discrete Charm of Uniform Linear Pricing of an Input Production Joint Venture," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 8(2), pages 68-83, October.

    More about this item

    Keywords

    Input Production Joint Venture; Horizontal Differentiation; Oligopoly;

    JEL classification:

    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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