The ambiguous competitive effects of passive partial forward integration

Konstantinos Papadopoulos and Panagiotis Skartados
Authors registered in the RePEc Author Service: Emmanuel Petrakis

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: In a two-tier industry with an upstream monopolist supplier and downstream competition with differentiated goods, we show that passive partial forward integration (PPFI) has ambiguous effects on competition and welfare. When vertical trading is conducted via linear tariffs, PPFI is pro-competitive and welfare-increasing. While under two-part tariffs, it is anti-competitive and welfare-decreasing. These hold irrespectively of the degree of product differentiation, the observability or secrecy of contract terms, the mode of downstream competition, and the distribution of bargaining power between firms.

Keywords: Partial; Passive; Forward; Integration; Two-Part; Tariffs; Linear; Tariffs; Competition; Welfare (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 2021-10-01
New Economics Papers: this item is included in nep-bec, nep-com, nep-cta, nep-ind, nep-mic, nep-ore and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:33354

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