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Managerial Firms, Vertical Integration, and Consumer Welfare

Author

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  • Patrick Legros

    (ECARES, Universite Libre de Bruxelles)

  • Andrew F. Newman

    (Department of Economics, University College London)

Abstract

We show that vertical integration decisions of managers may affect adversely consumers even in the absence of monopoly power in either supply or product markets. This effect is most likely to come about when demand is initially high and there is a negative supply shock or when demand is low and there is a positive demand shock. The results are robust to the introduction of active shareholders and to other extensions.

Suggested Citation

  • Patrick Legros & Andrew F. Newman, 2004. "Managerial Firms, Vertical Integration, and Consumer Welfare," Economics Working Papers 0037, Institute for Advanced Study, School of Social Science.
    • Handle: RePEc:ads:wpaper:0037
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    File URL: http://www.sss.ias.edu/publications/papers/econpaper37.pdf
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    References listed on IDEAS

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