Double Marginalization and Vertical Integration

Arbeitspapier

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 and reduces the likelihood that the buyer purchases from independent suppliers. Conditional on market foreclosure, the probability that final consumers are harmed is positive only if the buyer has more bargaining power when selecting suppliers than when negotiating over quantities and intermediate prices. The buyer’s and consumers’ interests are otherwise aligned.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 8971

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Firm Strategy, and Market Performance: General ; Antitrust Issues and Policies: General ; Market Structure, Pricing, and Design: General ; Information, Knowledge, and Uncertainty: General
• Subject: antitrust policy ; vertical merger ; asymmetric information ; bargaining ; double marginalization ; procurement mechanism

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Choné, Philippe ; Linnemer, Laurent ; Vergé, Thibaud
• Event: Veröffentlichung
• (who): Center for Economic Studies and Ifo Institute (CESifo)
• (where): Munich
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/235341
• Last update: 10.03.2025, 11:43 AM CET