Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76173
Authors: 
Bühler, Stefan
Schmutzler, Armin
Year of Publication: 
2005
Series/Report no.: 
Working Paper, Socioeconomic Institute, University of Zurich 0409
Abstract: 
We examine the interplay of endogenous vertical integration and costreducing downstream investment in successive oligopoly. We start from a linear Cournot model to motivate our more general reducedform framework. For this general framework, we establish the following main results: First, vertical integration increases own investment and decreases competitor investment (intimidation effect). Second, asymmetric equilibria typically involve integrated firms that invest more into efficiency than their separated counterparts. Our findings suggest that asymmetric vertical integration is a potential explanation for the initial difference between leader and laggard in investment games.
Subjects: 
vertically related oligopolies
investment
vertical integration
cost reduction
JEL: 
L13
L20
L22
Document Type: 
Working Paper

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