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Input Production Joint Venture

Author

Listed:
  • Rossini Gianpaolo

    (University of Bologna, gianpaolo.rossini@unibo.it)

  • Vergari Cecilia

    (University of Bologna, cecilia.vergari@unibo.it)

Abstract

In many industries, it is quite common to observe firms delegating the production of essential inputs to independent ventures jointly established with competing rivals. The diffusion of this arrangement and the favourable stance of competition authorities call for the assessment of the social and private desirability of Input Production Joint Ventures (IPJV), which represent a form of input production cooperation, scantly investigated so far. IPJV can be seen as an intermediate organizational setting lying between the two extremes of vertical integration and vertical separation, with a major difference, due to partial collusion. Our investigation is based on an oligopoly model with horizontally differentiated goods. We characterize the conditions under which IPJV is privately optimal finding that firms' incentives may be welfare detrimental. We also provide a rationale for the empirical relevance of IPJV both in terms of its ability to survive and in terms of disengagement incentives which account for the large number of divorces among members of joint ventures. The stance of the paper as to IPJV is more cautious with respect to the received wisdom of competition authorities and in favour of the wide application of the rule of reason.

Suggested Citation

  • Rossini Gianpaolo & Vergari Cecilia, 2011. "Input Production Joint Venture," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 11(1), pages 1-50, March.
    • Handle: RePEc:bpj:bejtec:v:11:y:2011:i:1:n:5
    DOI: 10.2202/1935-1704.1685
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    References listed on IDEAS

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    Cited by:

    1. Cabral, Luis & Vasconcelos, Helder & Brito, Duarte, 2016. "Competitive Effects of Partial Control in an Input Supplier," CEPR Discussion Papers 11397, C.E.P.R. Discussion Papers.
    2. Gianpaolo Rossini & Cecilia Vergari, 2014. "The Discrete Charm of Uniform Linear Pricing of an Input Production Joint Venture," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 8(2), pages 68-83, October.
    3. 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.
    4. G. Rossini & C. Vergari, 2010. "Pitfalls in vertical arrangements," Working Papers 709, Dipartimento Scienze Economiche, Universita' di Bologna.

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    More about this item

    Keywords

    Input Production Joint Venture; horizontal mergers; oligopoly;
    All these keywords.

    JEL classification:

    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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