Vertical Integration and Market Foreclosure with Convex Downstream Costs

Pio Baake, Ulrich Kamecke and Hans-Theo Normann

No 260, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: In a framework with an upstream monopoly and a downstream duopoly, we analyze the impact of convex costs on the downstream level. In constrast to the case of constant marginal costs, vertical integration does not imply complete market foreclosure. While the nonintegrated downstream ¯rm receives a strictly positive amount of the intermediate good, the downstream allocation is ine±cient. However, a parametrized example indicates that competition at the downstream level may increase aggregate welfare.

Keywords: Vertical restraints; commitment (search for similar items in EconPapers)
JEL-codes: C72 C73 D82 L10 (search for similar items in EconPapers)
Pages: 11 p.
Date: 2001
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Citations: View citations in EconPapers (5)

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Journal Article: Vertical Integration and Market Foreclosure with Convex Downstream Costs (2002)
Working Paper: Vertical Integration and Market Foreclosure with Convex Downstream Costs (2001)
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