To Merge or to Help Related Firms Merge? Vertical Mergers in Cournot Oligopolies with Complementary Inputs

Consider a successive oligopoly where the production of a final good requires two complementary inputs: one essential input produced by a sole supplier and one generic input produced by oligopolistic suppliers. We compare the profitability of two strategies for the essential input supplier: one is t...

Full description

Saved in:
Bibliographic Details
Published in:經濟論文 2024-03, Vol.52 (1), p.1-35
Main Authors: Wei-Jen Wen(溫偉任), Wen-Chieh Lee(李文傑), Vincent K. C. Chen(陳畊嘉)
Format: Article
Language:Chinese
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Consider a successive oligopoly where the production of a final good requires two complementary inputs: one essential input produced by a sole supplier and one generic input produced by oligopolistic suppliers. We compare the profitability of two strategies for the essential input supplier: one is to help related firms merge vertically; the other is to acquire a downstream firm itself. We show that it is in the interest of the essential input supplier to subsidize a fraction of firms in the market to merge vertically when there are few related firms, as these subsidized mergers can trigger further vertical mergers and lead to the maximum number of pairwise vertical mergers whereby the monopolistic supplier can grasp the bulk of the efficiency gains stemming from eliminating double marginalization. In contrast, it is more profitable for the essential input supplier to acquire a downstream firm and foreclose other downstream competitors when the number of related firms is large, as the subsidization required by
ISSN:1018-161X