Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/235341 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 8971
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
Asymmetric information in procurement entails double marginalization. The phenomenon is most severe when the buyer has all the bargaining power at the production stage, while it vanishes when the buyer and suppliers’ weights are balanced. Vertical integration eliminates double marginalization and reduces the likelihood that the buyer purchases from independent suppliers. Conditional on market foreclosure, the probability that final consumers are harmed is positive only if the buyer has more bargaining power when selecting suppliers than when negotiating over quantities and intermediate prices. The buyer’s and consumers’ interests are otherwise aligned.
Subjects: 
antitrust policy
vertical merger
asymmetric information
bargaining
double marginalization
procurement mechanism
JEL: 
L10
L40
D40
D80
Document Type: 
Working Paper
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