Vertical mergers in procurement markets
Charles Thomas ()
International Journal of Industrial Organization, 2011, vol. 29, issue 2, 200-209
This paper uses computational methods that reveal ambiguous strategic effects of vertical mergers in a duopoly setting featuring incomplete information about sellers' costs, and differences in sellers' productive capabilities. First, vertical mergers can be jointly unprofitable. Second, the buyer's preferred merger partner is almost always the seller with lower expected costs, and is typically the larger seller. Third, vertical mergers always reduce the unintegrated seller's profits, sometimes dramatically. Finally, vertical mergers can increase total welfare. Some of the results contrast qualitatively with unambiguous findings from models with symmetric sellers, which suggests that caution should be used in drawing general inferences from those models.
Keywords: Vertical; integration; Incomplete; information; Imperfect; competition; Auctions; Numerical; methods (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:29:y:2011:i:2:p:200-209
Access Statistics for this article
International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal
More articles in International Journal of Industrial Organization from Elsevier
Series data maintained by Dana Niculescu ().