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Anticompetitive Vertical Integration by a Dominant Firm

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  • Riordan, M.H.

Abstract

Backward vertical integration by a dominant firm into an upstream competitive industry causes both input and output prices to rise. The dominant firm's cost advantage may or may not offset the negative effect to higher prices on social welfare. Whether it does depends on a simple indicator derived from input and output market shares and the degree of prior vertical integration. A vertical merger is equivalent to a hypothetical horizontal merger, suggesting that vertical merger policy for this industry structure should be similar to horizontal merger policy.

Suggested Citation

  • Riordan, M.H., 1996. "Anticompetitive Vertical Integration by a Dominant Firm," Papers 64, Boston University - Industry Studies Programme.
  • Handle: RePEc:fth:bostin:64
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    Keywords

    COMPETITION; PRICING; ENTREPRISES; MERGERS;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • 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
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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