Vertical relations and number of channels in quality-differentiated markets

Bacchiega, Emanuele ; Bonroy, Olivier (2012) Vertical relations and number of channels in quality-differentiated markets. [Preprint]
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Abstract

Double marginalization causes inefficiencies in vertical markets. This paper argues that such inefficiencies may be beneficial to final consumers in markets producing vertically differentiated goods. The rationale behind this result is that enhancing efficiency in high-quality supply chains through vertical integration may drive out of the market low-quality ones, thus affecting market structure. As a consequence, restoring-efficiency vertical integration may reduce consumer surplus, even in the absence of foreclosure strategies by the newly integrated firms. From a policy standpoint, our paper suggests that input and/or customer foreclosure should not be considered as the only source of antitrust concern when assessing the effects of vertical integration.

Abstract
Document type
Preprint
Creators
CreatorsAffiliationORCID
Bacchiega, Emanuele
Bonroy, Olivier
Keywords
Vertical product differentiation, Vertical integration, Buyer power
Subjects
DOI
Deposit date
08 May 2012 15:39
Last modified
08 May 2012 15:39
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