Merge and compete: strategic incentives to vertical integration

Filippo Vergara Caffarelli

No 65, Working Papers in Public Economics from Department of Economics and Law, Sapienza University of Roma

Abstract: Vertical integration followed by quantity competition is studied. The downstream rms simultaneously decide whether to integrate with one of the upstream suppliers. If rms are not able to observe whether the vertically integrated competitor enters the intermediate good market, they are indifferent about vertical integration. However, if it is possible to observe the entry choice of the vertically integrated entity, the unique equilibrium involves vertical integration and in-house production of the intermediate good. The importance of entrys observability sheds light on the strategic importance of information exchange institutions such as the internet and business fairs.

Keywords: Vertical integration; market entry. (search for similar items in EconPapers)
JEL-codes: L22 (search for similar items in EconPapers)
Pages: 32
Date: 2002-02
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Related works:
Journal Article: Merge and Compete: Strategic Incentives for Vertical Integration (2007)
Working Paper: Merge and Compete. Strategic incentives for vertical integration (2006)
Working Paper: Merge and Compete: Strategic Incentives To Vertical Integration (2004)
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