IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Market Structure and the Competitive Effects of Vertical Integration

  • Simon Loertscher
  • Markus Reisinger

We analyze the competitive effects of backward vertical integration in a model with oligopolistic firms that exert market power upstream and downstream. In contrast to previous literature, we show that a small degree of vertical integration is always procompetitive because efficiency effects dominate foreclosure effects. Moreover, vertical integration even to monopoly can be procompetitive. With regard to market structure, we find, somewhat surprisingly, that vertical integration is more likely to be procompetitive if the industry is more concentrated. Our model thus suggests that antitrust authorities should be particularly wary of vertical integration in relatively competitive industries. We demonstrate that the quantitative welfare effects can be substantial there.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Our checks indicate that this address may not be valid because: 404 Not Found ( [301 Moved Permanently]--> If this is indeed the case, please notify (Aminata Doumbia)

Download Restriction: no

Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 1136.

in new window

Length: 44 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:mlb:wpaper:1136
Contact details of provider: Postal: Department of Economics, The University of Melbourne, 4th Floor, FBE Building, Level 4, 111 Barry Street. Victoria, 3010, Australia
Phone: +61 3 8344 5355
Fax: +61 3 8344 6899
Web page:

More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Lucy White & Volker Nocke, 2004. "Do Vertical Mergers Facilitate Upstream Collusion?," 2004 Meeting Papers 45, Society for Economic Dynamics.
  2. Chen, Yongmin, 2001. "On Vertical Mergers and Their Competitive Effects," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 667-85, Winter.
  3. Francine Lafontaine & Margaret Slade, 2007. "Vertical Integration and Firm Boundaries: The Evidence," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 629-685, September.
  4. Nocke, Volker & Whinston, Michael, 2008. "Dynamic Merger Review," CEPR Discussion Papers 7077, C.E.P.R. Discussion Papers.
  5. Inderst, Roman & Valletti, Tommaso, 2011. "Incentives for input foreclosure," European Economic Review, Elsevier, vol. 55(6), pages 820-831, August.
  6. Joshua Gans & Catherine de Fontenay, 2004. "Vertical Integration in the Presence of Upstream Competition," Econometric Society 2004 North American Winter Meetings 7, Econometric Society.
  7. Volker Nocke & Peter EsoLucy White, 2007. "Competition for Scarce Resources," Economics Series Working Papers 365, University of Oxford, Department of Economics.
  8. repec:clu:wpaper:0203-13 is not listed on IDEAS
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:mlb:wpaper:1136. 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: (Aminata Doumbia)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.