Asymmetric Vertical Integration

Stefan Buehler () and Armin Schmutzler
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Armin Schmutzler: University of Zurich, CEPR and ENCORE

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

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)
JEL-codes: L13 L22 L40 L82 (search for similar items in EconPapers)
Date: 2005

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Working Paper: Asymmetric Vertical Integration (2004)
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Persistent link: http://EconPapers.repec.org/RePEc:bpj:bejtec:v:advances.5:y:2005:i:1:n:1

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