The Competitive Impact of Vertical Integration by Multiproduct Firms | Zendy

Fernando Luco | Zendy; Guillermo Marshall | Zendy

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The Competitive Impact of Vertical Integration by Multiproduct Firms

Author(s) -

Fernando Luco,

Guillermo Marshall

Publication year - 2020

Publication title -

american economic review

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 16.936

H-Index - 297

eISSN - 1944-7981

pISSN - 0002-8282

DOI - 10.1257/aer.20180071

Subject(s) - vertical integration , incentive , economics , vertical restraints , exploit , industrial organization , microeconomics , computer science , computer security

We study the impact of vertical integration on pricing incentives in multiproduct industries. To do so, we exploit recent variation in vertical structure in the US carbonated-beverage industry. While the elimination of double marginalization with vertical integration is normally characterized as procompetitive, economic theory predicts that it may cause anticompetitive price increases in multiproduct industries. We indeed find that vertical integration causes price decreases in products with eliminated double margins but price increases in the other products sold by the integrated firm. These results provide new evidence of anticompetitive effects of vertical mergers.

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