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Vertical cross‐ownership, input price discrimination, and social welfare

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  • Ji Sun
  • Leonard F. S. Wang

Abstract

In this paper, we analyze the impact of vertical cross‐ownership with input price discrimination on social welfare. A higher degree of product differentiation will raise industry profit, consumer surplus, and social welfare; under forward cross‐ownership, a higher degree of cross‐ownership has the same effect, in addition, it will reduce rival firm's profit and increase upstream firm's profit; however, under backward cross‐ownership, a higher degree of cross‐ownership has an opposite effect. Furthermore, under Cournot and Bertrand competition, forward cross‐ownership will incentivize downstream firms to produce more via a lower input price, achieving the above effect.

Suggested Citation

  • Ji Sun & Leonard F. S. Wang, 2023. "Vertical cross‐ownership, input price discrimination, and social welfare," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(2), pages 290-308, June.
    • Handle: RePEc:bla:ijethy:v:19:y:2023:i:2:p:290-308
    DOI: 10.1111/ijet.12344
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    References listed on IDEAS

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