STRATEGIC VERTICAL INTEGRATION WITHOUT FORECLOSURE -super-*

Eric Avenel ()

Journal of Industrial Economics, 2008, vol. 56, issue 2, pages 247-262

Abstract: We determine the endogenous degree of vertical integration in a model of successive oligopoly that captures both efficiency gains and strategic effects. Foreclosure effects are purposely left aside. The profitability of integration originates in the greater ability of integrated firms to adopt a specific type of technologies. We show that vertical merger waves can stop by themselves before integration is complete because of strategic substitutability in vertical integration. This is in contrast to the strategic complementarity result in McLaren [2000] that leads to either complete integration or complete separation. Copyright 2008 The Author. Journal compilation 2008 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics.

Date: 2008
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Journal of Industrial Economics is edited by Pierre Regibeau, Yeon-Koo Che, Kenneth Corts, Thomas Hubbard, Patrick Legros and Frank Verboven

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