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Demand-driven integration and divorcement policy

par Legros, Patrick ;Newman, Andrew A.F.
Référence International journal of industrial organization, 53, page (306-325)
Publication Publié, 2017-07

Article révisé par les pairs

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Résumé :

Traditionally, vertical integration has concerned industrial economists only insofar as it affects market outcomes, particularly prices. This paper considers reverse causality, from prices – and more generally, from demand – to integration in a model of a dynamic oligopoly. If integration is costly but enhances productive efficiency, then a trend of rising prices and increasing integration could be due to growing demand, in which case a divorcement policy of forced divestiture may be counterproductive. Divorcement can only help consumers if it undermines collusion, but then there are dominating policies. We discuss well-known divorcement episodes in retail gasoline and British beer, as well as other evidence, in light of the model.