Excess entry, vertical integration, and welfare.

From: RAND Journal of Economics | Date: December 22, 1999| Author: | Copyright information

This article provides a systematic analysis of the welfare effects of vertical integration by a monopolist input supplier into a monopolistically competitive downstream industry. We give sufficient conditions on consumer preferences that lead to Pareto-improvlng vertical integration and demonstrate a close relationship between assumptions on preference for variety, excess entry in monopolistically competitive markets, and the welfare effects of vertical integration: Excess entry in downstream markets tends to give rise to Pareto-improving vertical integration. We extend the ...

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