A BEJTE Advances article.

Abstract

We examine vertical backward integration in a reduced-form model of successive oligopolies. Our key findings are: (i) There may be asymmetric equilibria where some firms integrate and others remain separated, even if firms are symmetric initially; (ii) Efficient firms are more likely to integrate vertically. As a result, integrated firms also tend to have a large market share. The driving force behind these findings are demand/mark-up complementarities in the product market. We also identify countervailing forces resulting from strong vertical foreclosure, upstream sales and endogenous acquisition costs.

Submitted: June 24, 2004 · Accepted: October 31, 2004 · Published: January 4, 2005

Originally published in Advances in Theoretical Economics.

Recommended Citation

Buehler, Stefan and Schmutzler, Armin (2005) "Asymmetric Vertical Integration," Advances in Theoretical Economics: Vol. 5 : Iss. 1, Article 1.
Available at: http://www.bepress.com/bejte/advances/vol5/iss1/art1