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Title:Backwards integration and strategic delegation PDF Logo
Authors:Hunold, Matthias
Röller, Lars-Hendrik
Stahl, Konrad
Issue Date:2012
Series/Report no.:ZEW Discussion Papers 12-022
Abstract:We analyze the effects of downstream firms' acquisition of pure cash flow rights in an efficient upstream supplier when all firms compete in prices. With an acquisition, downstream firms internalize the effects of their actions on their rivals' sales. Double marginalization is enhanced. Whereas full vertical integration would lead to decreasing, passive backwards ownership leads to increasing downstream prices and is more profitable, as long as competition is sufficiently intensive. Downstream acquirers strategically abstain from vertical control, inducing the efficient supplier to commit to high prices. All results are sustained when upstream suppliers are allowed to charge two part tariffs.
Subjects:double marginalization
strategic delegation
vertical integration
partial ownership
common agency
JEL:L22
L40
Persistent Identifier of the first edition:urn:nbn:de:bsz:180-madoc-322041
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des ZEW
ZEW Discussion Papers

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