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Collaborate Or Consolidate: Assessing The Competitive Effects Of Production Joint Ventures

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  • Nicolas Aguelakakis
  • Aleksandr Yankelevich

Abstract

We analyze collaborations in which two firms facing external competition reorganize to form an input joint venture as an alternative to horizontal merger. Under standard regularity conditions, the collaboration can lead to higher profits than a horizontal merger, though the effect on prices, quantities, and welfare depends on the form of downstream competition. In light of our results regarding profits, we provide reasons why firms might still wish to merge: imperfect information, cost synergies, and organizational asymmetries. We further consider how our comparisons change with the managerial structure of the joint venture (i.e., by delegation of input pricing). (JEL L13, L23, L42)

Suggested Citation

  • Nicolas Aguelakakis & Aleksandr Yankelevich, 2019. "Collaborate Or Consolidate: Assessing The Competitive Effects Of Production Joint Ventures," Economic Inquiry, Western Economic Association International, vol. 57(1), pages 73-84, January.
    • Handle: RePEc:bla:ecinqu:v:57:y:2019:i:1:p:73-84
    DOI: 10.1111/ecin.12707
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    References listed on IDEAS

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    Cited by:

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    2. Allison Baker & Timothy Brennan & Jack Erb & Omar Nayeem & Aleksandr Yankelevich, 2014. "Economics at the FCC, 2013–2014," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 45(4), pages 345-378, December.

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    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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