Vertical integration, foreclosure, and productive efficiency

• Autores: Markus Reisinger, Emanuele Tarantino
• Localización: The Rand Journal of Economics, ISSN-e 1756-2171, Vol. 46, Nº. 3, 2015, págs. 461-479
• Idioma: inglés
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• Resumen

  • We analyze the consequences of vertical integration by a monopoly producer dealing with two retailers (downstream firms) of varying efficiency via secret two-part tariffs. When integrated with the inefficient retailer, the monopoly producer does not foreclose the rival retailer due to an output-shifting effect. This effect can induce the integrated firm to engage in below-cost pricing at the wholesale level, thereby rendering integration procompetitive. Output shifting arises with homogeneous and differentiated products. Moreover, we show that integration with an inefficient retailer emerges in a model with uncertainty over retailers' costs, and this merger can be procompetitive in expectation