Asymmetric Vertical Integration

Stefan Buehler and Armin Schmutzler

No 306, SOI - Working Papers from Socioeconomic Institute - University of Zurich

Abstract: We examine vertical backward integration in a reducedform 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.

Keywords: successive oligopolies; vertical integration; effciency; foreclosure (search for similar items in EconPapers)
JEL-codes: L13 L22 L40 L82 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2003-08, Revised 2004-11
New Economics Papers: this item is included in nep-mic
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Published in Advances in Theoretical Economics 5(1), 2005, Article 1

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https://www.zora.uzh.ch/id/eprint/52178/1/wp0306.pdf Revised version, 2004 (application/pdf)

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Journal Article: Asymmetric Vertical Integration (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:soz:wpaper:0306

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