Abstract: Vertical mergers have long been viewed as suspicious by antitrust enforcers and as anomalous by economists. During the last decade, however, appealing rationales for vertical integration have been advanced, both within and beyond the neoclassical framework, and their implications are here extended to the analysis of vertical mergers. The neoclassical approach to vertical integration (and hence to vertical mergers) is based on the existence of market power in the intermediate product market.' The exercise of market power is supposed to imply a divergence between the value of the marginal product of the input and its marginal cost. By eliminating that divergence vertical integration increases the profitability of the combined enterprise.2 Economists have also advanced rationales for vertical integration such as economies of scope between successive stages of production (Chandler),
Publication Year: 1985
Publication Date: 1985-01-01
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 76
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