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COLLABORATE OR CONSOLIDATE: ASSESSING THE COMPETITIVE EFFECTS OF PRODUCTION JOINT VENTURES
Author(s) -
Aguelakakis Nicolas,
Yankelevich Aleksandr
Publication year - 2019
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12707
Subject(s) - joint venture , merge (version control) , economics , industrial organization , microeconomics , delegation , competition (biology) , imperfect competition , welfare , business , commerce , market economy , management , ecology , biology , computer science , information retrieval
We analyze collaborations in which two firms facing external competition reorganize to form an input joint venture as an alternative to horizontal merger. Under standard regularity conditions, the collaboration can lead to higher profits than a horizontal merger, though the effect on prices, quantities, and welfare depends on the form of downstream competition. In light of our results regarding profits, we provide reasons why firms might still wish to merge: imperfect information, cost synergies, and organizational asymmetries. We further consider how our comparisons change with the managerial structure of the joint venture (i.e., by delegation of input pricing). ( JEL L13, L23, L42)