Merge and Compete: Strategic Incentives To Vertical Integration

Filippo Vergara Caffarelli

Industrial Organization from EconWPA

Abstract: Vertical integration followed by quantity competition is studied. The downstream firms simultaneously decide whether to integrate with one of the upstream suppliers. If firms are not able to observe whether the vertically integrated competitor enters the intermediate good market, they are indifferent about vertical integration. However, if it is possible to observe the entry choice of the vertically integrated entity, the unique equilibrium involves vertical integration and in- house production of the intermediate good. The importance of entry's observability sheds light on the strategic importance of information exchange institutions such as the internet and business fairs.

Keywords: Vertical integration; market entry. (search for similar items in EconPapers)
JEL-codes: L22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-net
Date: 2004-02-23
Note: Type of Document - pdf; prepared on windows; pages: 32; figures: 5
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http://129.3.20.41/eps/io/papers/0402/0402004.pdf (application/pdf)

Related works:
Working Paper: Merge and Compete. Strategic incentives for vertical integration (2006)
Working Paper: MERGE AND COMPETE: STRATEGIC INCENTIVES TO VERTICAL INTEGRATION (2004)
Journal Article: Merge and Compete: Strategic Incentives for Vertical Integration (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpio:0402004

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