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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.

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Abstract

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.

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Socioeconomic Institute (former)
DDC:330 Economics
JEL Classification:L13, L22, L40, L82
Language:English
Date:September 2003
Deposited On:29 Nov 2011 23:32
Last Modified:09 Jul 2012 07:03
Series Name:Working paper series / Socioeconomic Institute
Official URL:http://www.econ.uzh.ch/wp.html

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