Vertical Integration, Collusion Downstream, and Partial Market Foreclosure
This paper proposes a model where an upstream monopolist sells an input to a downstream industry, which may alternatively acquire a perfect substitute for the monopolist's input from a competitive industry. By vertically integrating with a downstream firm, the upstream monopolist may charge a wholesale price above marginal cost, even if the competitive industry is as efficient as the monopolist. This result was not obtained under vertical separation. Furthermore, provided that the number of downstream firms is not too high, the range of values of the discount factor that sustain the monopoly price in the downstream market is enlarged by the introduction of the marked-up wholesale price.
|Date of creation:||01 Nov 2005|
|Contact details of provider:|| Web page: http://www.unav.edu/web/facultad-de-ciencias-economicas-y-empresariales|
References listed on IDEAS
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- Hardt, Michael, 1995. "Market foreclosure without vertical integration," Economics Letters, Elsevier, vol. 47(3-4), pages 423-429, March.
- Volker Nocke & Lucy White, 2007.
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- Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
- Hart, O. & Tirole, J., 1990. "Vertical Integration And Market Foreclosure," Working papers 548, Massachusetts Institute of Technology (MIT), Department of Economics.
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