Munich Personal RePEc Archive

Forward Vertical Integration: The Fixed-Proportion Case Revisited

Bonroy, Olivier and Larue, Bruno (2006): Forward Vertical Integration: The Fixed-Proportion Case Revisited.

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Assuming a fixed-proportion downstream production technology, partial forward integration by an upstream monopolist may be observed whether the monopolist is advantaged or disadvantaged cost-wise relative to fringe firms in the downstream market. Integration need not induce cost predation and the fringe firms’ margin may even increase. The output price falls and welfare unambiguously rises.

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