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dc.contributor.authorde Fontenay, CC
dc.contributor.authorGans, JS
dc.date.available2014-05-21T20:45:32Z
dc.date.issued2005-09-01
dc.identifierhttp://gateway.webofknowledge.com/gateway/Gateway.cgi?GWVersion=2&SrcApp=PARTNER_APP&SrcAuth=LinksAMR&KeyUT=WOS:000234785900004&DestLinkType=FullRecord&DestApp=ALL_WOS&UsrCustomerID=d4d813f4571fa7d6246bdc0dfeca3a1c
dc.identifier.citationde Fontenay, C. C. & Gans, J. S. (2005). Vertical integration in the presence of upstream competition. RAND JOURNAL OF ECONOMICS, 36 (3), pp.544-572
dc.identifier.issn0741-6261
dc.identifier.urihttp://hdl.handle.net/11343/27757
dc.descriptionC1 - Refereed Journal Article
dc.description.abstractWe analyze vertical integration in the case of upstream competition andcompare 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 themodelling of strategic vertical integration. First, we base industry structure –namely, the ownership of assets – firmly within the property rights approach tofirm boundaries. Second, we model the potential multilateral negotiations using afully specified, non-cooperative bargaining model designed to easily compareoutcomes achieved under upstream competition and monopoly. Given this, wedemonstrate that vertical integration can alter the joint payoff of integratingparties in ex post bargaining; however, this bargaining effect is stronger for firmsintegrating under upstream competition than upstream monopoly. We alsoconsider the potential for integration to internalize competitive externalities in amanner that cannot be achieved under non-integration; i.e., by favouring internalover external supply. We demonstrate that ex post monopolization is more likelyto occur when there is an upstream monopoly than when there is upstreamcompetition. Our general conclusion is that the simple intuition that the presenceof upstream competition can mitigate and reduce the incentives for sociallyundesirable vertical integration is misplaced and, depending upon the strength ofdownstream competition (i.e., product differentiation), the opposite could easilybe the case.
dc.languageEnglish
dc.publisherWILEY
dc.subjectEconomic Theory
dc.titleVertical integration in the presence of upstream competition
dc.typeJournal Article
melbourne.peerreviewPeer Reviewed
melbourne.affiliationThe University of Melbourne
melbourne.affiliation.departmentEconomics & Commerce - Economics
melbourne.source.titleRAND Journal of Economics
melbourne.source.volume36
melbourne.source.issue3
melbourne.source.pages544-572
melbourne.publicationid42120
melbourne.elementsid256457
melbourne.contributor.authorde Fontenay, Catherine
melbourne.contributor.authorGANS, JOSHUA
dc.identifier.eissn1756-2171
melbourne.accessrightsOpen Access


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