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Vertical integration as a source of hold-up: An experiment

Marie-Laure Allain (), Claire Chambolle, Patrick Rey () and Sabrina Teyssier

European Economic Review, 2021, vol. 137, issue C

Abstract: In a vertical chain in which two rivals invest before contracting with one of two competing suppliers, vertical integration can create hold-up problems for the rival. We develop an experiment to test this theoretical prediction in a setup in which suppliers can either pre-commit ex ante to being greedy or degrade ex post the input they provide to their customer. Our experimental results confirm that vertical integration creates hold-up problems. However, vertical integration also generates more departures from theory, which can be explained by bounded rationality and social preferences.

Keywords: Vertical integration; Hold-up; Experimental economics; Bounded rationality; Social preferences (search for similar items in EconPapers)
JEL-codes: C91 D90 L13 L41 L42 (search for similar items in EconPapers)
Date: 2021
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Related works:
Working Paper: Vertical integration as a source of hold-up: An experiment (2021) Downloads
Working Paper: Vertical Integration as a Source of Hold-up: an Experiment (2020) Downloads
Working Paper: Vertical Integration as a Source of Hold-up: an Experiment (2020) Downloads
Working Paper: Vertical integration as a source of hold-up: an experiment (2017)
Working Paper: Vertical integration as a source of hold-up: an experiment (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:137:y:2021:i:c:s0014292121001367

DOI: 10.1016/j.euroecorev.2021.103783

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