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| Author: | Chen, Y. |
| Title: | On vertical mergers and their competitive effects |
| Journal: | RAND Journal of Economics
2001 : WINTER, VOL 32:4, p. 667-685 |
| Index terms: | Vertical integration Mergers Prices Economic theory Competition |
| Language: | eng |
| Abstract: | It is well known that vertical integration can change the pricing incentive of an upstream producer. However, it has been noticed that vertical integration may also change the pricing incentive of a downstream producer and the incentive of a competitor in choosing input suppliers. An equilibrium theory of vertical merger that incorporates these additional strategic considerations is developed. Under fairly general conditions, a vertical merger will result in both efficiency gains and a collusive effect. The competitive effects of a vertical merger depend on the cost of switching suppliers and the degree of downstream product differentiation. |
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