How do market structures affect decisions on vertical integration/separation?

Noriaki Matsushima and Tomomichi Mizuno

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: We provide a simple model to investigate decisions on vertical integration/separation. The key feature of this model is that more than one input is required for the final products of the local downstream monopolists. Depending on their cost structure, downstream firms' decisions on vertical separation can be both strategic complements and strategic substitutes. As a result, the equilibrium number of vertically integrated firms depends on the cost structure. When the local downstream monopolists merge, vertical separation tends to appear in equilibrium. When an upstream firm can price discriminate, the downstream firms vertically separate. When the downstream firms compete with each other, vertical integration tends to appear if the degree of product differentiation is lower.

Date: 2010-02
New Economics Papers: this item is included in nep-com and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.iser.osaka-u.ac.jp/static/resources/docs/dp/2010/DP0770.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:0770

Access Statistics for this paper

More papers in ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka Contact information at EDIRC.
Bibliographic data for series maintained by Librarian ().