Vertical Integration in the presence of a Cost-Reducing Technology

Benoit Voudon ()
Additional contact information
Benoit Voudon: Department of Economics, Trinity College Dublin

Economic Papers from Trinity College Dublin, Economics Department

Abstract: This paper examines vertical integration incentives in the presence of a cost-reducing technology. Combining the technology adoption and vertical merger literatures in a simple duopoly model, I show that asymmetric integration can occur even in a purely symmetric set-up, without synergies or foreclosure incentives. This paper makes three further contributions. First, in this model, integration is profitable whenever it allows the firm to adopt the technology faster and to become a profitable technology leader for a longer period of time. Second, comparing preemption and precommitment game, I show that the asymmetric equilibrium may exist under both types of game. Third, vertical integration generally reduces consumers' surplus, but often competition authorities should not forbid such vertical mergers if they seek to maximize social welfare.

Keywords: precommitment game; preemption game; timing of technology adoption; vertical relations; vertical integration (search for similar items in EconPapers)
JEL-codes: L11 L22 L42 O33 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2019-09
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.tcd.ie/Economics/TEP/2019/TEP0919.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tcd:tcduee:tep0919

Access Statistics for this paper

More papers in Economic Papers from Trinity College Dublin, Economics Department Contact information at EDIRC.
Bibliographic data for series maintained by Colette Angelov ().