Downstream investment in oligopoly

Arbeitspapier

We examine cost-reducing investment in vertically-related oligopolies, where firms may be vertically integrated or separated. Analyzing a standard linear Cournot model, we show that: (i) Integrated firms invest more than separated competitors. (ii) Vertical integration increases own investment and decreases competitor investment. (iii) Firms may integrate strategically so as to preempt investments by competitors. Adopting a reduced-form approach, we identify demand/mark-up complementarities in the product market as the driving force for these results. We show that our results generalize naturally beyond the Cournot example, and we discuss policy implications.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 0310

Classification and Topics

• Classification: Wirtschaft ; Oligopoly and Other Imperfect Markets ; Firm Organization and Market Structure ; Antitrust Issues and Policies: General ; Entertainment; Media
• Subject: vertically-related oligopolies ; investments ; vertical integration ; cost reduction

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Buehler, Stefan ; Schmutzler, Armin
• Event: Veröffentlichung
• (who): University of Zurich, Socioeconomic Institute
• (where): Zurich
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/76134
• Last update: 10.03.2025, 11:44 AM CET