Vertical Enclosure: Vertical Integration and the Reluctance to Purchase from a Competitor

D. Lee Heavner

Journal of Industrial Economics, 2004, vol. 52, issue 2, 179-199

Abstract: Vertical integration can reduce integrating firms' trading opportunities and, contrary to predictions of two‐firm models, this loss of trade can make integration unprofitable. If downstream units must commit to suppliers before contracting on the final terms of trade, then suppliers will have ex‐post monopoly power. This monopoly power reduces the quality that an integrated supplier will provide to its competitors. Expectations of this quality reduction can prevent firms from purchasing from an integrated supplier even though the supplier would be better off if it could commit to provide its downstream competitors with sufficient quality to retain their business.

Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://doi.org/10.1111/j.0022-1821.2004.00222.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jindec:v:52:y:2004:i:2:p:179-199

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0022-1821

Access Statistics for this article

Journal of Industrial Economics is currently edited by Pierre Regibeau, Yeon-Koo Che, Kenneth Corts, Thomas Hubbard, Patrick Legros and Frank Verboven

More articles in Journal of Industrial Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().