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Asymmetric Vertical Integration

  • Stefan Buehler

    ()

    (Socioeconomic Institute, University of Zurich)

  • Armin Schmutzler

    ()

    (Socioeconomic Institute, University of Zurich)

We examine vertical backward integration in a reducedform model of successive oligopolies. Our key findings are: (i) There may be asymmetric equilibria where some firms integrate and others remain separated, even if firms are symmetric initially; (ii) Efficient firms are more likely to integrate vertically. As a result, integrated firms also tend to have a large market share. The driving force behind these findings are demand/mark-up complementarities in the product market. We also identify countervailing forces resulting from strong vertical foreclosure, upstream sales and endogenous acquisition costs.

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File URL: http://www.soi.uzh.ch/research/wp/2003/wp0306.pdf
File Function: Revised version, 2004
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Paper provided by Socioeconomic Institute - University of Zurich in its series SOI - Working Papers with number 0306.

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Length: 25 pages
Date of creation: Aug 2003
Date of revision: Nov 2004
Publication status: Published in Advances in Theoretical Economics 5(1), 2005, Article 1
Handle: RePEc:soz:wpaper:0306
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  1. Rainer Winkelmann, 2002. "Subjektive Daten in der empirischen Wirtschaftsforschung: Probleme und Perspektiven," SOI - Working Papers 0207, Socioeconomic Institute - University of Zurich, revised Jul 2002.
  2. Zava Aydemir & Stefan Buehler, 2002. "Estimating Vertical Foreclosure in U.S. Gasoline Supply," SOI - Working Papers 0212, Socioeconomic Institute - University of Zurich.
  3. Thomas Borek & Stefan Buehler & Armin Schmutzler, 2002. "Weddings with Uncertain Prospects – Mergers under Asymmetric Information," SOI - Working Papers 0213, Socioeconomic Institute - University of Zurich, revised Feb 2004.
  4. Stefan Buehler & Armin Schmutzler & Men-Andri Benz, 2002. "Infrastructure Quality in Deregulated Industries: Is there an Underinvestment Problem?," SOI - Working Papers 0209, Socioeconomic Institute - University of Zurich.
  5. Slade, Margaret E, 1998. "Strategic Motives for Vertical Separation: Evidence from Retail Gasoline Markets," Journal of Law, Economics and Organization, Oxford University Press, vol. 14(1), pages 84-113, April.
  6. Dennis L. Gärtner & Daniel Halbheer, 2008. "Are There Waves in Merger Activity After All?," Working Papers 0092, University of Zurich, Institute for Strategy and Business Economics (ISU).
  7. Andreas Polk, 2002. "Multilateral Agreement On Investments (MAI) - A Critical Assessment From an Industrial Economics Point of View," SOI - Working Papers 0201, Socioeconomic Institute - University of Zurich, revised Feb 2002.
  8. Mahler, Philippe & Winkelmann, Rainer, 2004. "Single Motherhood and (Un)Equal Educational Opportunities: Evidence for Germany," IZA Discussion Papers 1391, Institute for the Study of Labor (IZA).
  9. Andreas Polk & Armin Schmutzler, 2003. "Lobbying against Environmental Regulation vs. Lobbying for Loopholes," SOI - Working Papers 0301, Socioeconomic Institute - University of Zurich.
  10. Bühler, Stefan & Schmutzler, Armin, 2003. "Who Integrates?," CEPR Discussion Papers 4066, C.E.P.R. Discussion Papers.
  11. Thomas Borek & Stefan Buehler & Armin Schmutzler, 2004. "Mergers under Asymmetric Information – Is there a Lemons Problem?," SOI - Working Papers 0408, Socioeconomic Institute - University of Zurich.
  12. Yves Schneider & Peter Zweifel, 2002. "How Much Internalization of Nuclear Risk Through Liability Insurance?," SOI - Working Papers 0211, Socioeconomic Institute - University of Zurich.
  13. Daniel Halbheer & Sarah Niggli & Armin Schmutzler, 2006. "What Does it Take to Sell Environmental Policy? An Empirical Analysis of Referendum Data," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 33(4), pages 441-462, 04.
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