Theory shows that vertical integration has contrasting two effects, efficiency and foreclosure effects. This study empirically estimates the relative size of these two effects. Unlike previous studies, I focus on a single vertical merger in order to use a panel dataset, and estimate its average...

This paper introduces a novel method for examining the effects of vertical integration. The basic idea is to estimate the parameters of a vertical entry game. By carefully specifying firms' payoff equations and constructing appropriate tests, it is possible to use estimates on rival profit...

When a monopolist sells an input to an oligopoly, consumer and total surplus frequently are invariant to changes in passive ownership of the monopolist by downstream firms. Within broad classes of ownership profiles, strong invariance holds: the input and output choices of downstream firms are...

The recent literature on vertical foreclosure suggests that vertical integration can have the anticompetitive effect of enabling an upstream firm to commit to restricting output to downstream firms at the monopoly level. We allow the upstream firm to make an ex-ante capital precommitment. We...

In a framework with an upstream monopoly and a downstream duopoly, we analyze the impact of convex costs on the downstream level. In contrast to the case of constant marginal costs, vertical integration does not imply complete market foreclosure. While the non-integrated downstream firm receives...

Using a vertical differentiation model, we investigate the product quality strategies of two competing firms maximizing market shares. The firms are facing variable costs of quality improvement and choose their prices under the constraint of nonnegative profits. We show that in equilibrium there...

The sub-contracting of land transport is the governmental structure most used by Spanish transport firms. This model is the result of a vertical disintegration process that entails selling vehicles and reassigning tasks within or outside the business. Institutional reforms that regulate...

We examine the case of a firm holding the option to make an uncertain and irreversible investment. The firm is decentralized and there is information asymmetry between the owner and the investment manager regarding the price of an input (e.g. a key equipment) that needs to be purchased by an...

Asymmetric information in procurement entails double marginalization. The phenomenon is most severe when the buyer has all the bargaining power at the production stage, while it vanishes when the buyer and suppliers’ weights are balanced. Vertical integration eliminates double marginalization...

We construct a model of market-share contracts with vertical externalities. When a dominant supplier offers a linear wholesale price to a retailer, vertical externalities, well-recognized as double-marginalization problems, arise in the vertical relation. The dominant supplier facing vertical...