Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/92793
Authors: 
Matsushima, Noriaki
Mizuno, Tomomichi
Year of Publication: 
2010
Series/Report no.: 
ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 770
Abstract: 
We provide a simple model to investigate decisions on vertical integration/separation. The key feature of this model is that more than one input is required for the final products of the local downstream monopolists. Depending on their cost structure, downstream firms' decisions on vertical separation can be both strategic complements and strategic substitutes. As a result, the equilibrium number of vertically integrated firms depends on the cost structure. When the local downstream monopolists merge, vertical separation tends to appear in equilibrium. When an upstream firm can price discriminate, the downstream firms vertically separate. When the downstream firms compete with each other, vertical integration tends to appear if the degree of product differentiation is lower.
Subjects: 
vertical integration
vertical separation
local monopolists
inputs
technology
JEL: 
D43
L13
L22
M11
Document Type: 
Working Paper

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