Abstract
This paper examines vertical integration incentives in the presence of a cost-reducing technology. Combining the technology adoption and vertical merger literatures in a simple duopoly model, I show that asymmetric integration can occur even in a purely symmetric set-up, without synergies or foreclosure incentives. This paper makes three further contributions. First, in this model, integration is profitable whenever it allows the firm to adopt the technology faster and to become a profitable technology leader for a longer period of time. Second, comparing preemption and precommitment game, I show that the asymmetric equilibrium may exist under both types of game. Third, integration generally reduces consumers' surplus, but often competition authorities should not forbid such vertical mergers if they seek to maximize social welfare.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
