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Title:Vertical Integration and Market Foreclosure with Convex Downstream Costs PDF Logo
Authors:Baake, Pio
Kamecke, Ulrich
Normann, Hans-Theo
Issue Date:2001
Series/Report no.:DIW-Diskussionspapiere 260
Abstract:In a framework with an upstream monopoly and a downstream duopoly, we analyze the impact of convex costs on the downstream level. In contrast to the case of constant marginal costs, vertical integration does not imply complete market foreclosure. While the non-integrated downstream firm receives a strictly positive amount of the intermediate good, the downstream allocation is inefficient. However, a parametrized example indicates that competition at the downstream level may increase aggregate welfare.
Subjects:Vertical restraints
commitment
JEL:C72
C73
D82
L10
Document Type:Working Paper
Appears in Collections:DIW-Diskussionspapiere
Publikationen von Forscherinnen und Forschern des DIW

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