Implications of Nash Bargaining for Horizontal Industry Integration

This article shows how horizontal industry integration can arise from transferable asymmetry of technologies and endowments. The Nash bargaining solution suggests that greater technological diversity among coordinating parties yields greater gains from horizontal integration. The framework fits the case where a firm with a superior technology franchises the technology by horizontal integration. The results appear to fit hog production where integration has been primarily horizontal and, in part, broiler production where integration has been both vertical and horizontal. Specifically, technology has been shared through uniform genetic traits, fine-tuned feed rations, and veterinary services specified in grower contracts. Copyright 2005 American Agricultural Economics Association.