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Competitive vertical integration
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Autores
Orientador(es)
Resumo(s)
In this paper, we assess that sufficient conditions for full vertical integration in a duopoly hold if marginal costs are constant and quantities are strategic substitutes. That is to say: vertical integration by both duopolists is an equilibrium outcome of a non-cooperative game under fairly general assumptions. Two conditions lie behind this result. The first one, is that, if all firms are disintegrated, it pays off for a producer and a distributor to merge unilaterally. The second one, assuming that merging decisions take place sequentially, is that it is profitable for the remaining upstream-downstream firms to follow vertical integration. However, if the firms can reach a binding agreement on vertical structures, they will prefer to remain disintegrated: profit of an integrated firm under full vertical integration is smaller than the sum of producer's and distributor's profits when all firms are disintegrated.
Descrição
Palavras-chave
Industrial Economics Duopoly Vertical Integration Competition Econometric Model
Contexto Educativo
Citação
Pontes, José Pedro (1993). "Competitive vertical integration". Estudos de Economia, Volume XIV, Nº1 : pp. 3-14
Editora
Instituto Superior de Economia e Gestão