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

Mariana Cunha and Paula Sarmento ()
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Paula Sarmento: CEF.UP, Research Center in Economics and Finance, University of Porto and FEP-UP

FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

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 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.

Keywords: Vertical integration; Collusion; Cartel Stability (search for similar items in EconPapers)
JEL-codes: D43 L12 L13 L42 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2012-08
New Economics Papers: this item is included in nep-bec and nep-com
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Does Vertical Integration Promote Downstream Incomplete Collusion? An Evaluation of Static and Dynamic Stability (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:por:fepwps:465

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