How Do Market Structures Affect Decisions on Vertical Integration/separation?
نویسندگان
چکیده
We provide a simple model to investigate decisions on vertical integration/separation. The key feature of this model is that more than one input is required for the final products of the local downstream monopolists. Depending on their cost structure, downstream firms’ decisions on vertical separation can be both strategic complements and strategic substitutes. As a result, the equilibrium number of vertically integrated firms depends on the cost structure. When the local downstream monopolists merge, vertical separation tends to appear in equilibrium. When an upstream firm can price discriminate, the downstream firms vertically separate. When the downstream firms compete with each other, vertical integration tends to appear if the degree of product differentiation is lower. JEL Classification Codes: D43, L13, L22, M11.
منابع مشابه
Infrastructure Quality in Deregulated Industries: Is There an Underinvestment Problem?
We investigate how various institutional settings affect a network provider's incentives to invest in infrastructure quality. Under reasonable assumptions on demand, investment incentives turn out to be smaller under vertical separation than under vertical integration, though we also provide counterexamples. The introduction of downstream competition for the market can sometimes improve incenti...
متن کاملVertical Integration and Market Power in Electricity Markets
Vertical separation of generation from electricity retailing has often been required as a condition of electricity market liberalisation. A well-developed and liquid contracts market is similarly suggested as necessary to manage the resulting wholesale market risks, which risks are further exacerbated by competition. Such contracts markets are rare, however, and increasingly evidence is emergin...
متن کاملHow Capability Differences, Transaction Costs
This paper provides an integrative analysis of the drivers of vertical scope, and formalizes theory on capability-driven integration, focusing on the following questions: (1) How does the distribution of individual firm capabilities along a value chain affect vertical scope? (2) How do transaction costs interact with capability distributions in vertically linked segments to determine scope at t...
متن کاملVertical Integration and Market Foreclosure
Few people would disagree with the proposition that horizontal mergers have the potential to restrict output and raise consumer prices. In contrast, there is much less agreement about the anti-competitive effects of vertical mergers. The purpose of this paper is to develop a theoretical model showing how vertical integration changes the nature of competition in upstream and downstream markets a...
متن کاملThe Experience of Integration in the Dental Curriculum of the World’s Accredited Universities and How to Apply it in Iran
Introduction: The aim of this paper is to review integration experience in general dentistry curriculum in the world universities in the twenty-first century and advantage of it to review the same curriculum in Iran. Method: In this study, a qualitative method is used. First, by library research and the analysis and interpretation of data, integration of the dental curriculum were some prestig...
متن کامل