The Competitive Impact of Vertical Integration by Multiproduct Firms

Fernando Luco and Guillermo Marshall

American Economic Review, 2020, vol. 110, issue 7, 2041-64

Abstract: We study the impact of vertical integration on pricing incentives in multiproduct industries. To do so, we exploit recent variation in vertical structure in the US carbonated-beverage industry. While the elimination of double marginalization with vertical integration is normally characterized as procompetitive, economic theory predicts that it may cause anticompetitive price increases in multiproduct industries. We indeed find that vertical integration causes price decreases in products with eliminated double margins but price increases in the other products sold by the integrated firm. These results provide new evidence of anticompetitive effects of vertical mergers.

JEL-codes: D22 D43 G34 L13 L22 L66 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (38)

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DOI: 10.1257/aer.20180071

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