Does Vertical Integration Promote Downstream Incomplete Collusion? An Evaluation of Static and Dynamic Stability

• Type: Article in International Scientific Journal
• Date: 2014

Authors

Paula Sarmento (Author) FEP; Mariana Cunha (Author) FEP

Journal

Title: Journal of Industry, Competition and Trade

Vol. 14 No. 1

Pages: 1-38

ISSN: 1566-1679

Publisher: Springer Nature

Indexing

Scopus - 2 Citations

Econlit

Scientific classification

FOS: Social sciences > Economics and Business

CORDIS: Social sciences > Economics > Microeconomics

Other information

Authenticus ID: P-008-95B

DOI: 10.1007/s10842-012-0150-9

Abstract (EN): This paper analyzes the impact of vertical integration on the static and dynamic stability of downstream incomplete collusion. It is shown that a vertical merger between an upstream firm and a downstream cartel or fringe firm promotes downstream collusion, under certain conditions on the market size. However, for low downstream market concentration, a vertical merger with a cartel firm hinders collusion. Moreover, a welfare analysis shows that consumer surplus increases with the vertical merger because the merger partially eliminates the double marginalization problem.

Language: English

Type (Professor's evaluation): Scientific