Do Prices Determine Vertical Integration?

Cementing Relationships: Vertical Integration, Foreclosure, Productivity, and Prices*

This paper looks at the reasons for and results of vertical integration, with specific regard to its possible effects on market power as proposed in the theoretical literature on foreclosure. It uses a rich plant-level data set of cement and ready-mixed concrete producers that spans several decades to perform a detailed case study. There is little evidence that vertical foreclosure effects are ...

How Do Market Structures Affect Decisions on Vertical Integration/separation?

We provide a simple model to investigate decisions on vertical integration/separation. The key feature of this model is that more than one input is required for the final products of the local downstream monopolists. Depending on their cost structure, downstream firms’ decisions on vertical separation can be both strategic complements and strategic substitutes. As a result, the equilibrium numb...

Do Producer Prices Lead Consumer Prices?

From June 1994 to June 1995, producer prices increased rapidly. Excluding food and energy, prices of crude materials and intermediate goods rose at annual rates of 7.2 and 16.7 percent, respectively. At the same time, however, prices of consumer goods and services excluding food and energy increased a more modest 2.9 percent. Many analysts are concerned that recent increases in the prices of cr...

Asymmetric Vertical Integration

We examine vertical backward integration in a reducedform model of successive oligopolies. Our key findings are: (i) There may be asymmetric equilibria where some firms integrate and others remain separated, even if firms are symmetric initially; (ii) Efficient firms are more likely to integrate vertically. As a result, integrated firms also tend to have a large market share. The driving force ...

Is Vertical Integration Anticompetitive?