Vertical cross‐ownership, input price discrimination, and social welfare

Ji Sun and Leonard F. S. Wang

International Journal of Economic Theory, 2023, vol. 19, issue 2, 290-308

Abstract: In this paper, we analyze the impact of vertical cross‐ownership with input price discrimination on social welfare. A higher degree of product differentiation will raise industry profit, consumer surplus, and social welfare; under forward cross‐ownership, a higher degree of cross‐ownership has the same effect, in addition, it will reduce rival firm's profit and increase upstream firm's profit; however, under backward cross‐ownership, a higher degree of cross‐ownership has an opposite effect. Furthermore, under Cournot and Bertrand competition, forward cross‐ownership will incentivize downstream firms to produce more via a lower input price, achieving the above effect.

Date: 2023
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https://doi.org/10.1111/ijet.12344

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Persistent link: https://EconPapers.repec.org/RePEc:bla:ijethy:v:19:y:2023:i:2:p:290-308

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