Vertical integration as a source of hold-up: An experiment

Marie-Laure Allain, Claire Chambolle, Patrick Rey and Sabrina Teyssier ()
Additional contact information
Claire Chambolle: ALISS - Alimentation et sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique
Sabrina Teyssier: GAEL - Laboratoire d'Economie Appliquée de Grenoble - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes

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Abstract: In a vertical chain in which two rivals invest before contracting with one of two competing suppliers, vertical integration can create hold-up problems for the rival. We develop an experiment to test this theoretical prediction in a setup in which suppliers can either pre commit ex ante to being greedy or degrade ex post the input they provide to their customer. Our experimental results confirm that vertical integration creates hold-up problems. However, vertical integration also generates more departures from theory, which can be explained by bounded rationality and social preferences.

Keywords: Vertical integration; Hold-up; Experimental economics; Bounded rationality; Social preferences (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-com, nep-cta, nep-exp, nep-isf and nep-reg
Note: View the original document on HAL open archive server: https://hal.science/hal-03341440v1
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Citations: View citations in EconPapers (1)

Published in European Economic Review, 2021, 137, pp.103783. ⟨10.1016/j.euroecorev.2021.103783⟩

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Related works:
Journal Article: Vertical integration as a source of hold-up: An experiment (2021)
Working Paper: Vertical Integration as a Source of Hold-up: an Experiment (2020)
Working Paper: Vertical Integration as a Source of Hold-up: an Experiment (2020)
Working Paper: Vertical integration as a source of hold-up: an experiment (2017)
Working Paper: Vertical integration as a source of hold-up: an experiment (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03341440

DOI: 10.1016/j.euroecorev.2021.103783

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