Vertical integration, market floreclosure and quality investment

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dc.contributor.author Hernán, Roberto
dc.contributor.author Kujal, Praveen
dc.date.accessioned 2012-07-23T16:42:49Z
dc.date.available 2012-07-23T16:42:49Z
dc.date.issued 2012-04
dc.identifier.bibliographicCitation Portuguese economic journal, v. 11, n. 1, apr. 2012, pp. 1-20
dc.identifier.issn 1617-982X
dc.identifier.uri http://hdl.handle.net/10016/14968
dc.description.abstract We study incentives to vertically integrate in an industry with vertically differentiated downstream firms. Vertical integration by one of the firms increases production costs for the rival. Increased production costs negatively affects quality investment both by the integrated firm and the unintegrated rival. Quality investment by both firms decreases under any (vertical integration) scenario. The decrease in quality invesment by both firms softens competition among downstream firms. By integrating first, a firm always produces the high quality good and earns higher profits. A fully integrated industry, with increased product differentiation, is observed in equilibrium. Due to increase in firm profits, social welfare under this structure is greater than under no integration.
dc.description.sponsorship Hernan and Kujal acknowledge support from grant 2009/00055/001 from the Spanish Ministry of Education. Kujal acknowledges support from the Instituto Universitario de Economía, Consolider-Ingenio 2010 and the Comunidad de Madrid (grant Excelecon).
dc.format.mimetype application/pdf
dc.language.iso eng
dc.publisher Springer
dc.relation.isversionof http://hdl.handle.net/10016/372
dc.rights ©Springer
dc.subject.other Vertical integration
dc.subject.other Quality investment
dc.subject.other Market power
dc.subject.other Product differentiation
dc.title Vertical integration, market floreclosure and quality investment
dc.type article
dc.description.status Publicado
dc.relation.publisherversion http://dx.doi.org/10.1007/s10258-011-0074-z
dc.subject.jel L15
dc.subject.jel L22
dc.subject.jel L42
dc.subject.eciencia Economía
dc.identifier.doi 10.1007/s10258-011-0074-z
dc.rights.accessRights openAccess
dc.type.version acceptedVersion
dc.identifier.publicationfirstpage 1
dc.identifier.publicationissue 1
dc.identifier.publicationlastpage 20
dc.identifier.publicationtitle Portuguese economic journal
dc.identifier.publicationvolume 11
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