Does Vertical Integration Promote Downstream Incomplete Collusion? An Evaluation of Static and Dynamic Stability
This paper analyzes the impact of vertical integration on the static and dynamic stability of downstream incomplete collusion. It is shown that a vertical merger between an upstream firm and a downstream cartel or fringe firm promotes downstream collusion, under certain conditions on the market size. However, for low market concentration, a vertical merger with a cartel firm hinders collusion. Moreover, a welfare analysis shows that consumer surplus increases with the vertical merger because the merger partially eliminates the double marginalization problem.
|Date of creation:||Aug 2012|
|Contact details of provider:|| Postal: Rua Dr. Roberto Frias, 4200 PORTO|
Web page: http://www.fep.up.pt/
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.:
- Sylvie Thoron, 1998. "Formation of a Coalition-Proof Stable Cartel," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 63-76, February.
- Normann, Hans-Theo, 2009.
"Vertical integration, raising rivals' costs and upstream collusion,"
European Economic Review,
Elsevier, vol. 53(4), pages 461-480, May.
- Hans-Theo Normann, 2008. "Vertical Integration, Raising Rivals’ Costs and Upstream Collusion," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2008_30, Max Planck Institute for Research on Collective Goods.
- James W. Friedman, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Oxford University Press, vol. 38(1), pages 1-12.
- George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
- Marc Escrihuela-Villar, 2009. "Does cartel leadership facilitate collusion?," DEA Working Papers 39, Universitat de les Illes Balears, Departament d'Economía Aplicada.
- Pedro Mendi & Rafael Moner-Colonques & José Sempere-Monerris, 2011. "Vertical integration, collusion, and tariffs," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 2(3), pages 359-378, September.
- Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 98(2), pages 185-199.
- Jason WHALLEY & Peter CURWEN, 2008. "Is Functional Separation BT-Style the Answer?," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(71), pages 145-168, 3rd quart.
- Donsimoni, Marie-Paule, 1985. "Stable heterogeneous cartels," International Journal of Industrial Organization, Elsevier, vol. 3(4), pages 451-467, December.
- Chen, Yongmin, 2001. "On Vertical Mergers and Their Competitive Effects," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 667-685, Winter.
- Yongmin Chen, 2000. "On Vertical Mergers and Their Competitive Effects," Econometric Society World Congress 2000 Contributed Papers 0383, Econometric Society.
- Nocke, Volker & White, Lucy, 2010. "Vertical merger, collusion, and disruptive buyers," International Journal of Industrial Organization, Elsevier, vol. 28(4), pages 350-354, July.
- Nocke, Volker & White, Lucy, 2010. "Vertical Merger, Collusion, and Disruptive Buyers," CEPR Discussion Papers 7722, C.E.P.R. Discussion Papers.
- Ordover, Janusz A & Saloner, Garth & Salop, Steven C, 1990. "Equilibrium Vertical Foreclosure," American Economic Review, American Economic Association, vol. 80(1), pages 127-142, March.
- Marc Escrihuela-Villar, 2008. "On endogenous cartel size under tacit collusion," Investigaciones Economicas, Fundación SEPI, vol. 32(3), pages 325-338, September.
- Claude d'Aspremont & Alexis Jacquemin & Jean Jaskold Gabszewicz & John A. Weymark, 1983. "On the Stability of Collusive Price Leadership," Canadian Journal of Economics, Canadian Economics Association, vol. 16(1), pages 17-25, February.
- d'ASPREMONT, Claude & JACQUEMIN, Alexis & GABSZEWICZ, Jean J. & WEYMARK, John A., "undated". "On the stability of collusive price leadership," CORE Discussion Papers RP 522, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Marc Escrihuela-Villar, 2009. "A note on cartel stability and endogenous sequencing with tacit collusion," Journal of Economics, Springer, vol. 96(2), pages 137-147, March.
- Marc Escrihuela Villar, 2008. "A note on cartel stability and endogenous sequencing with tacit collusion," DEA Working Papers 29, Universitat de les Illes Balears, Departament d'Economía Aplicada.
- Michael A. Salinger, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, Oxford University Press, vol. 103(2), pages 345-356.
- Marc Escrihuela, 2002. "Cartel Sustainability And Cartel Stability," Working Papers. Serie AD 2002-16, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Marc Escrihuela-Villar, 2004. "Cartel Sustainability and Cartel Stability," Working Papers 2004.44, Fondazione Eni Enrico Mattei.
- 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.
- Nocke, Volker & White, Lucy, 2004. "Do Vertical Mergers Facilitate Upstream Collusion?," CEPR Discussion Papers 4186, C.E.P.R. Discussion Papers.
- Lucy White & Volker Nocke, 2004. "Do Vertical Mergers Facilitate Upstream Collusion?," 2004 Meeting Papers 45, Society for Economic Dynamics.
- Donsimoni, Marie-Paule & Economides, Nicholas S & Polemarchakis, Herakles M, 1986. "Stable Cartels," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(2), pages 317-327, June.
- Salop, Steven C & Scheffman, David T, 1987. "Cost-Raising Strategies," Journal of Industrial Economics, Wiley Blackwell, vol. 36(1), pages 19-34, September.
- Andrea Lofaro, 1999. "When imperfect collusion is profitable," Journal of Economics, Springer, vol. 70(3), pages 235-259, October.
- Yongmin Chen & Michael H. Riordan, 2007. "Vertical integration, exclusive dealing, and expost cartelization," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 1-21, 03.
- Iwan Bos & Joseph E. Harrington, Jr, 2010. "Endogenous cartel formation with heterogeneous firms," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 92-117.
- Iwan Bos & Joseph E. Harrington, Jr., 2008. "Endogenous Cartel Formation with Heterogeneous Firms," Economics Working Paper Archive 544, The Johns Hopkins University,Department of Economics, revised Nov 2008.
- Posada, P., 2001. "Leadership Cartels in Industries with Differentiated Products," The Warwick Economics Research Paper Series (TWERPS) 590, University of Warwick, Department of Economics.
- Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June.
- Reinhard Selten, 1973. "A Simple Model of Imperfect Competition, where 4 are Few and 6 are Many," Center for Mathematical Economics Working Papers 008, Center for Mathematical Economics, Bielefeld University. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:por:fepwps:465. 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: ()
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.