Does Vertical Integration Promote Downstream Incomplete Collusion? An Evaluation of Static and Dynamic Stability

Mariana Cunha and Paula Sarmento ()

Journal of Industry, Competition and Trade, 2014, vol. 14, issue 1, 38 pages

Abstract: This paper analyzes the impact of vertical integration on the static and dynamic stability of downstream incomplete collusion. It is shown that a vertical merger between an upstream firm and a downstream cartel or fringe firm promotes downstream collusion, under certain conditions on the market size. However, for low downstream market concentration, a vertical merger with a cartel firm hinders collusion. Moreover, a welfare analysis shows that consumer surplus increases with the vertical merger because the merger partially eliminates the double marginalization problem. Copyright Springer Science+Business Media New York 2014

Keywords: Vertical integration; Collusion; Cartel stability; L12; L13; L42; D43 (search for similar items in EconPapers)
Date: 2014
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Working Paper: Does Vertical Integration Promote Downstream Incomplete Collusion? An Evaluation of Static and Dynamic Stability (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:jincot:v:14:y:2014:i:1:p:1-38

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DOI: 10.1007/s10842-012-0150-9

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