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Partial Vertical Ownership with Asymmetric Information

Ricardo Gonçalves (), Peyman Khezr () and Flavio Menezes ()
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Ricardo Gonçalves: Católica Porto Business School, Universidade Catolica Portuguesa
Peyman Khezr: School of Economics, Finance and Marketing, RMIT University, Australia.
Flavio Menezes: School of Economics, University of Queensland, Brisbane, Australia

No 634, Discussion Papers Series from University of Queensland, School of Economics

Abstract: We examine the role of asymmetric information about costs on the impact of partial (non-controlling) vertical integration on competition. We show that Greenlee and Raskovich (2006)’s invariance result that total downstream quantity (and, therefore, competition) is not impacted by such acquisitions holds in the case of privately known marginal costs and symmetric ownership shares. This invariance result provides a possible explanation for why partial acquisitions where downstream firms own equal shares in an upstream firm with market power are so uncommon.

Keywords: Vertical integration; partial acquisition; asymmetric information. (search for similar items in EconPapers)
JEL-codes: D4 L1 L2 L4 (search for similar items in EconPapers)
Date: 2020-08-18
New Economics Papers: this item is included in nep-cfn, nep-com, nep-ind, nep-mic and nep-ore
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