On the vertical integration of successive monopolies

✍ Scribed by Thomas W. Ross

• Publisher: Springer US
• Year: 1992
• Tongue: English
• Weight: 522 KB
• Volume: 7
• Category: Article
• ISSN: 0889-938X
• DOI: 10.1007/bf00353403

✦ Synopsis

This essay studies the private incentives for, and welfare consequences of, the vertical integration of successive monopolies. When the merged firm is as efficient as its pre-merger components, private and social interests coincide and the merger raises welfare by eliminating the double mark-up. When the merger leads to higher costs it is possible that some mergers will be privately profitable but not socially desirable and that some will be socially desirable but not privately profitable. These results suggest that a laissez-faire approach to this type of merger by antitrust authorities will not always be appropriate.