Intimidating Competitors : Endogenous Vertical Integration and Downstream Investment in Successive Oligopoly
Journal
International Journal of Industrial Organization
ISSN
0167-7187
ISSN-Digital
1873-7986
Type
journal article
Date Issued
2008-01-01
Author(s)
Abstract
This paper examines the interplay of endogenous vertical integration and cost-reducing downstream investment in successive oligopoly. Analyzing a linear Cournot model, we establish the following key results: (i) Vertical integration increases own investment and decreases competitor investment (intimidation effect). (ii) Asymmetric integration is a non-degenerate equilibrium outcome. (iii) Compared to a benchmark model without investment, complete vertical separation is a less likely outcome. We argue that these findings generalize beyond the linear Cournot model under reasonable assumptions.
Language
English
Keywords
Vertically related oligopolies
Investment
Vertical integration
Cost reduction
HSG Classification
contribution to scientific community
Refereed
No
Publisher
Elsevier
Publisher place
Amsterdam
Volume
26
Number
1
Start page
247
End page
265
Pages
19
Subject(s)
Eprints ID
51416