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This paper constructs a model of a supply chain to examine how demand volatility is passed upstream through the chain. In particular, we seek to determine how likely it is that the chain experiences a bullwhip effect, where the variance of the upstream firm's production exceeds the variance of...
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. This paper expands on that view in building a new theory of vertical integration. In my model firms integrate to gain … in the production process have the greatest incentive to integrate. The theory provides novel insights to the …
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