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Horizontal integration in markets for complementary components and vertical product differentiation: A case-based analysis in the semiconductor industry

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  • B. Westbrock

Abstract

Observations of recent mergers and acquisitions (M&A) in the semiconductor and computer industry indicate that activities concentrate on the technology leaders in this market. The author examines the influence of players’ heterogeneous product technologies on their involvement in M&A. He provides a rationale for the influence with the help of a case study and a two-stage non cooperative game. The case is about an acquisition wave between suppliers in two semiconductor component markets. Exemplary for the whole industry, acquisition activities concentrated on the technology leader in one of the component markets. Technological heterogeneity is represented within a vertically differentiated product space in the model.

Suggested Citation

  • B. Westbrock, 2005. "Horizontal integration in markets for complementary components and vertical product differentiation: A case-based analysis in the semiconductor industry," Working Papers 05-05, Utrecht School of Economics.
  • Handle: RePEc:use:tkiwps:0505
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    File URL: https://dspace.library.uu.nl/bitstream/handle/1874/14984/05-05.pdf
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    References listed on IDEAS

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    1. Economides, Nicholas & Salop, Steven C, 1992. "Competition and Integration among Complements, and Network Market Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 105-123, March.
    2. Jeffrey Church & Neil Gandal, 2000. "Systems Competition, Vertical Merger, and Foreclosure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(1), pages 25-51, March.
    3. Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 3-13.
    4. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
    5. Shapiro, Carl, 1989. "Theories of oligopoly behavior," Handbook of Industrial Organization,in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 6, pages 329-414 Elsevier.
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    Keywords

    semiconductor industry; computer industry; horizontal integration; complementary product; product differentiation;

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