Demand-Driven Integration and Divorcement Policies

Patrick Legros and Andrew Newman

ULB Institutional Repository from ULB -- Universite Libre de Bruxelles

Abstract: Traditionally, vertical integration has concerned industrial economists only insofar as it affects market outcomes, particularly prices. This paper considers reverse causality, from prices – and more generally, from demand – to integration in a model of a dynamic oligopoly. If integration is costly but enhances productive efficiency, then a trend of rising prices and increasing integration could be due to growing demand, in which case a divorcement policy of forced divestiture may be counterproductive. Divorcement can only help consumers if it undermines collusion, but then there are dominating policies. We discuss well-known divorcement episodes in retail gasoline and British beer, as well as other evidence, in light of the model.

Keywords: Antitrust; OIO; Regulation; Reverse causality; Theory of the firm; Vertical integration (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Published in: International journal of industrial organization (2017) v.53,p.306-325

Downloads: (external link)
https://dipot.ulb.ac.be/dspace/bitstream/2013/249187/4/doi_232814.pdf Full text for the whole work, or for a work part (application/pdf)
https://dipot.ulb.ac.be/dspace/bitstream/2013/249187/3/j.ijindorg.2016.04.007 Full text for the whole work, or for a work part (application/octet-stream)

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:ulb:ulbeco:2013/249187

Ordering information: This working paper can be ordered from
http://hdl.handle.ne ... lb.ac.be:2013/249187

Access Statistics for this paper

More papers in ULB Institutional Repository from ULB -- Universite Libre de Bruxelles Contact information at EDIRC.
Bibliographic data for series maintained by Benoit Pauwels ().