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Forward Vertical Integration: The Fixed-Proportion Case Revisited

Author

Listed:
  • Olivier Bonroy

    (GAEL, INRA-Pierre Mendès France University)

  • Bruno Larue

    (CRÉA , Laval University)

Abstract

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 profits of the fringe may increase. The output price falls and welfare unambiguously rises.

Suggested Citation

  • Olivier Bonroy & Bruno Larue, 2007. "Forward Vertical Integration: The Fixed-Proportion Case Revisited," Economics Bulletin, AccessEcon, vol. 12(25), pages 1-9.
    • Handle: RePEc:ebl:ecbull:eb-07l20009
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    References listed on IDEAS

    as
    1. Riordan, Michael H, 1998. "Anticompetitive Vertical Integration by a Dominant Firm," American Economic Review, American Economic Association, vol. 88(5), pages 1232-1248, December.
    2. Salop, Steven C & Scheffman, David T, 1987. "Cost-Raising Strategies," Journal of Industrial Economics, Wiley Blackwell, vol. 36(1), pages 19-34, September.
    3. Blair, Roger D. & Cooper, Thomas E. & Kaserman, David L., 1985. "A note on vertical integration as entry," International Journal of Industrial Organization, Elsevier, vol. 3(2), pages 219-229, June.
    4. Herman C. Quirmbach, 1992. "Sequential Vertical Integration," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(3), pages 1101-1111.
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    Cited by:

    1. Bruno Larue & Olivier Bonroy, 2009. "Seemingly Competitive Food Retail Regulations: Who Do They Really Help?," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 57(3), pages 305-324, September.

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    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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