Asymmetric Vertical Integration

Stefan Buehler and Armin Schmutzler

The B.E. Journal of Theoretical Economics, 2005, vol. 5, issue 1, 27

Abstract: We examine vertical backward integration in a reduced-form 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.

Keywords: successive oligopolies; vertical integration; efficiency; foreclosure (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (18)

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DOI: 10.2202/1534-5963.1164

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