Publication:
The ambiguous competitive effects of passive partial forward integration

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URI: https://hdl.handle.net/10016/33354
ISSN: 2340-5031
UXXI: DT/0000001926
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2021-10-01
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Abstract
In a two-tier industry with an upstream monopolist supplier and downstream competition with differentiated goods, we show that passive partial forward integration (PPFI) has ambiguous effects on competition and welfare. When vertical trading is conducted via linear tariffs, PPFI is pro-competitive and welfare-increasing. While under two-part tariffs, it is anti-competitive and welfare-decreasing. These hold irrespectively of the degree of product differentiation, the observability or secrecy of contract terms, the mode of downstream competition, and the distribution of bargaining power between firms.
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Partial Passive Forward Integration, Two-Part Tariffs, Linear Tariffs, Competition, Welfare
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DE - Working Papers. Economics. WE