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Vertical integration, knowledge disclosure and decreasing rival's cost

Emmanuel Petrakis () and Chrysovalantou Milliou ()

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: We study vertical integration incorporating the fact that it creates the possibility of knowledge disclosure. We consider a setting where, through integrating, an upstream monopolist learns its downstream partner’s innovation, and can disclose it to its downstream rival. We show that a vertically integrated firm chooses to fully disclose its knowledge to its downstream rival. Knowledge disclosure intensifies downstream competition but, at the same time, expands the downstream market size. We also show that, due to knowledge disclosure, vertical integration increases firms’ innovation incentives, consumer and total welfare, and decreases, instead of raises, the rival’s cost.

Keywords: Vertical; integration; R&D; investments; Market; floreclosure; Knowledge; disclosure (search for similar items in EconPapers)
JEL-codes: L13 L22 L42 (search for similar items in EconPapers)
Date: 2012-04
New Economics Papers: this item is included in nep-bec, nep-com, nep-ino, nep-knm and nep-tid
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Citations: View citations in EconPapers (5) Track citations by RSS feed

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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:we1213

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