Zanaj, Skerdilajda
[Université du Luxembourg]
In this paper, we present a model of endogenous vertical integration
and horizontal differentiation. There exists two output brands and two
versions of the input. The only mean for output differentiation is the
input version used in output production. Firms may choose to vertically
integrate to produce internally the required input version at marginal cost,
rather then to buy it at the market price, if that version is made available.
We show that vertical mergers increase the possibility that output
goods are differentiated. Moreover, this occurs when the cost to differen-
tiate the input is high. On the other hand, vertical integration is detri-
mental for brand variety if the cost to differentiate inputs is negligible.
Bibliographic reference |
Zanaj, Skerdilajda. Product differentiation and vertical integration in presence of double marginalization. CORE Discussion Paper ; 2009/70 (2009) |
Permanent URL |
http://hdl.handle.net/2078.1/28673 |