Permanent URL to this publication: http://dx.doi.org/10.5167/uzh-52182
Buehler, Stefan; Schmutzler, Armin (2003). Downstream Investment in Oligopoly. Working paper series / Socioeconomic Institute No. 310, University of Zurich.
We examine cost-reducing investment in vertically-related oligopolies, where firms may be vertically integrated or separated. Analyzing a standard linear Cournot model, we show that: (i) Integrated firms invest more than separated competitors. (ii) Vertical integration increases own investment and decreases competitor investment. (iii) Firms may integrate strategically so as to preempt investments by competitors. Adopting a reduced-form approach, we identify demand/mark-up complementarities in the product market as the driving force for these results. We show that our results generalize naturally beyond the Cournot example, and we discuss policy implications.
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|Item Type:||Working Paper|
|Communities & Collections:||03 Faculty of Economics > Department of Economics
Working Paper Series > Socioeconomic Institute (former)
|JEL Classification:||L13, L22, L40, L82|
|Deposited On:||29 Nov 2011 22:32|
|Last Modified:||09 Jul 2012 05:03|
|Series Name:||Working paper series / Socioeconomic Institute|
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