This paper derives a model of vertical integration when it is difficult to write binding long-term supply price contracts. Thus, a vertically separated monopolist is vulnerable to hold-up. Without integration, we demonstrate that a bottleneck monopolist has an incentive to encourage more firms...

This paper considers the effect of exclusive contracts on investment decisions in a market with two upstream and two downstream firms. Segal and Whinston’s (2000) irrelevance result is generalized and it is shown that exclusive contracts have no effect on the equilibrium level of internal...

This paper reconsiders the result of Stole and Zwiebel (1996) that when a firm bargains with its workers over the wages in non-binding contracts, the firm will over-employ workers to reduce the hold-up power of any one. This result has stood in contrast to conclusions drawn in the literature on...

This paper considers the outsourcing choice of a downstream firm with its own upstream production assets. Using both a standard linear pricing model and a bilateral bargaining approach, we examine the equilibrium pricing outcomes that emerge if there are two downstream and two upstream assets....

We analyse vertical integration when there is upstream competition and compare outcomes to the case where upstream assets are owned by a single agent (i.e., upstream monopoly). In so doing, we make two contributions to the modelling of strategic vertical integration. First, we base industry...

This paper provides an analysis of a non-cooperative pairwise bargaining game between agents in a network. We establish that there exists an equilibrium that generates a coalitional bargaining division of the reduced surplus that arises as a result of externalities between agents. That is, we...

Vertical integration by a monopsonist is generally believed not to harm consumers. This paper demonstrates, in a natural economic setting, that this conventional wisdom may not hold. We model bargaining between a monopsonist and independent suppliers when it is difficult to write binding...