We model the impact of the transfer price rule (a constraint that requires the downstream division of a vertically-integrated firm to earn at least a normal rate of return on investment in the counterfactual case that it pays the same price as a nonintegrated firm for the essential input),...

We present a model of the impact of state aid on equilibrium market structure and on market performance in an integrating market when the process of integration is driven by consumer inertia. In a partial equilibrium model, it is an equilibrium for governments to grant state aid, even though...