Excess Entry, Vertical Integration and Welfare

Kai-Uwe Kühn and Xavier Vives

No 1293, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper provides a systematic analysis of the welfare effects of vertical integration by a monopolistic input supplier into a monopolistically competitive downstream industry. We give sufficient conditions on consumer preferences that lead to Pareto improving vertical integration. We demonstrate a close relationship between assumptions on preference for variety, excess entry in monopolistically competitive markets, and the welfare effects of vertical integration. Both excess entry and welfare improving vertical integration arise only if preference for variety falls as variety increases for given total output.

Keywords: Excess Entry; Preference for Variety; Vertical Integration (search for similar items in EconPapers)
JEL-codes: L1 L42 (search for similar items in EconPapers)
Date: 1995-11
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Citations: View citations in EconPapers (4)

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Journal Article: Excess Entry, Vertical Integration, and Welfare (1999)
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