How do market structures affect decisions on vertical integration

Arbeitspapier

We provide a simple model to investigate decisions on vertical integration/separation. The key feature of this model is that more than one input is required for the final products of the local downstream monopolists. Depending on their cost structure, downstream firms' decisions on vertical separation can be both strategic complements and strategic substitutes. As a result, the equilibrium number of vertically integrated firms depends on the cost structure. When the local downstream monopolists merge, vertical separation tends to appear in equilibrium. When an upstream firm can price discriminate, the downstream firms vertically separate. When the downstream firms compete with each other, vertical integration tends to appear if the degree of product differentiation is lower.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ISER Discussion Paper ; No. 770

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Oligopoly and Other Imperfect Markets ; Firm Organization and Market Structure ; Production Management
• Subject: vertical integration ; vertical separation ; local monopolists ; inputs ; technology ; Vertikale Integration ; Produktdifferenzierung ; Preisdifferenzierung ; Marktstruktur ; Unvollkommener Markt ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Matsushima, Noriaki ; Mizuno, Tomomichi
• Event: Veröffentlichung
• (who): Osaka University, Institute of Social and Economic Research (ISER)
• (where): Osaka
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/92793
• Last update: 10.03.2025, 11:42 AM CET