American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
The Competitive Impact of Vertical Integration by Multiproduct Firms
American Economic Review
vol. 110,
no. 7, July 2020
(pp. 2041–64)
Abstract
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.Citation
Luco, Fernando, and Guillermo Marshall. 2020. "The Competitive Impact of Vertical Integration by Multiproduct Firms." American Economic Review, 110 (7): 2041–64. DOI: 10.1257/aer.20180071Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- D43 Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
- G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
- L13 Oligopoly and Other Imperfect Markets
- L22 Firm Organization and Market Structure
- L66 Food; Beverages; Cosmetics; Tobacco; Wine and Spirits