Competitive Effects of Vertical Integration with Downstream Oligopsony and Oligopoly

Simon Loertscher () and Markus Reisinger ()
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Markus Reisinger: University of Munich

No 278, Discussion Papers from SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: We analyze the competitive effects of backward vertical integration by a partially vertically integrated firm that competes with non-integrated firms both upstream and downstream. We show that vertical integration is procompetitive under fairly general conditions. It can be anticompetitive only if the ex ante degree of integration is relatively large. Interestingly, vertical integration is more likely to be anticompetitive if the industry is less concentrated. These results are in line with recent empirical evidence. In addition, we show that even when vertical integration is procompetitive, it is not necessarily welfare enhancing.

Keywords: Vertical Integration; Downstream Oligopsony; Downstream Oligopoly; Competition Policy; Capacity Choice (search for similar items in EconPapers)
JEL-codes: D43 L41 L42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-cse and nep-ind
Date: 2009-10
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Persistent link: http://EconPapers.repec.org/RePEc:trf:wpaper:278

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