VERTICAL CONTRACTING WHEN COMPETITION FOR ORDERS PRECEDES PROCUREMENT*

Joshua Gans

Journal of Industrial Economics, 2007, vol. 55, issue 2, 325-346

Abstract: This paper reverses the standard order between input supply negotiations and downstream competition and assumes that competition for orders takes place prior to procurement of inputs in a vertical chain. It is found that oligopolistically competitive outcomes will result despite the presence of an upstream monopolist. Here, vertical integration is a means by which the monopolist can leverage its market power downstream to the detriment of consumers. However, it does so, not by foreclosing on independent downstream firms, but by softening the competitive behaviour of its own integrated units.

Date: 2007
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Citations: View citations in EconPapers (11)

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https://doi.org/10.1111/j.1467-6451.2007.00313.x

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Working Paper: Vertical Contracting When Competition for Orders Precedes Procurement (2004)
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