Vertical integration and product differentiation
We study horizontal product differentiation as a strategic decision of downstream firms facing a threat of vertical integration and market foreclosure by an upstream monopolist. We model product differentiation either as pure market segmentation or as generating positive value to consumers. Because of the threat of vertical integration, the downstream firms prefer more differentiation when the latter merely yields the anticompetitive effects of market segmentation, while they may prefer less differentiation when the latter would generate additional social value. Therefore, instead of market foreclosure, we indicate market segmentation or under-investment in socially valuable activities, such as product innovation, design, and informative advertising, as possible social costs of a lenient antitrust policy towards vertical mergers.
|Date of creation:||Apr 2012|
|Date of revision:||Sep 2012|
|Contact details of provider:|| Postal: Department of Economics University of Leicester, University Road. Leicester. LE1 7RH. UK|
Phone: +44 (0)116 252 2887
Fax: +44 (0)116 252 2908
Web page: http://www2.le.ac.uk/departments/economics
More information through EDIRC
|Order Information:|| Web: http://www2.le.ac.uk/departments/economics/research/discussion-papers Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Yongmin Chen, 2000.
"On Vertical Mergers and Their Competitive Effects,"
Econometric Society World Congress 2000 Contributed Papers
0383, Econometric Society.
- Buehler, Stefan & Schmutzler, Armin, 2008. "Intimidating competitors -- Endogenous vertical integration and downstream investment in successive oligopoly," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 247-265, January.
- Allain, Marie-Laure & Chambolle, Claire & Rey, Patrick, 2011.
"Vertical Integration, Information and Foreclosure,"
IDEI Working Papers
673, Institut d'Économie Industrielle (IDEI), Toulouse, revised Nov 2011.
- Michael A. Salinger, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, Oxford University Press, vol. 103(2), pages 345-356.
- Noriaki Matsushima, 2009. "VERTICAL MERGERS AND PRODUCT DIFFERENTIATION -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 57(4), pages 812-834, December.
- Paul Belleflamme & Eric Toulemonde, 2000.
"Product Differentiation in Successive Vertical Oligopolies,"
421, Queen Mary University of London, School of Economics and Finance.
- Paul Belleflamme & Eric Toulemonde, 2003. "Product differentiation in successive vertical oligopolies," Canadian Journal of Economics, Canadian Economics Association, vol. 36(3), pages 523-545, August.
- BELLEFLAMME, Paul & TOULEMONDE, Eric, . "Product differentiation in successive vertical oligopolies," CORE Discussion Papers RP 1720, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Volker Nocke & Lucy White, 2007.
"Do Vertical Mergers Facilitate Upstream Collusion?,"
American Economic Review,
American Economic Association, vol. 97(4), pages 1321-1339, September.
- Volker Nocke & Lucy White, 2003. "Do Vertical Mergers Facilitate Upstream Collusion?," PIER Working Paper Archive 03-033, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
- Lucy White & Volker Nocke, 2004. "Do Vertical Mergers Facilitate Upstream Collusion?," 2004 Meeting Papers 45, Society for Economic Dynamics.
- Nocke, Volker & White, Lucy, 2004. "Do Vertical Mergers Facilitate Upstream Collusion?," CEPR Discussion Papers 4186, C.E.P.R. Discussion Papers.
- Hart, O. & Tirole, J., 1990. "Vertical Integration And Market Foreclosure," Working papers 548, Massachusetts Institute of Technology (MIT), Department of Economics.
- Ordover, Janusz A & Saloner, Garth & Salop, Steven C, 1990. "Equilibrium Vertical Foreclosure," American Economic Review, American Economic Association, vol. 80(1), pages 127-42, March.
- Brocas, Isabelle, 2003. "Vertical integration and incentives to innovate," International Journal of Industrial Organization, Elsevier, vol. 21(4), pages 457-488, April.
- Häckner, Jonas, 2001.
"Vertical Integration and Competition Policy,"
Research Papers in Economics
2001:1, Stockholm University, Department of Economics.
- Economides, Nicholas, 1999.
"Quality choice and vertical integration,"
International Journal of Industrial Organization,
Elsevier, vol. 17(6), pages 903-914, August.
- Matsushima, Noriaki, 2004. "Technology of upstream firms and equilibrium product differentiation," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1091-1114, November.
- Milliou, Chrysovalantou, 2004. "Vertical integration and R&D information flow: is there a need for 'firewalls'?," International Journal of Industrial Organization, Elsevier, vol. 22(1), pages 25-43, January.
- Arya, Anil & Mittendorf, Brian & Sappington, David E.M., 2008. "Outsourcing, vertical integration, and price vs. quantity competition," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 1-16, January.
- George Norman & Lynne Pepall, 2000.
"Product Differentiation and Upstream-Downstream Relations,"
Discussion Papers Series, Department of Economics, Tufts University
0010, Department of Economics, Tufts University.
- Lynne Pepall & George Norman, 2001. "Product Differentiation and Upstream-Downstream Relations," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(2), pages 201-233, 06.
- Stefanadis, Christodoulos, 1997. "Downstream Vertical Foreclosure and Upstream Innovation," Journal of Industrial Economics, Wiley Blackwell, vol. 45(4), pages 445-56, December.
- Colangelo, Giuseppe, 1995. "Vertical vs. Horizontal Integration: Pre-emptive Merging," Journal of Industrial Economics, Wiley Blackwell, vol. 43(3), pages 323-37, September.
When requesting a correction, please mention this item's handle: RePEc:lec:leecon:12/17. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mrs. Alexandra Mazzuoccolo)
If references are entirely missing, you can add them using this form.