VERTICAL FORECLOSURE AND SPECIFIC INVESTMENTS
 | Name : VERTICAL FORECLOSURE AND SPECIFIC INVESTMENTS File Type : Size : 2361 KB |
VERTICAL FORECLOSURE AND SPECIFIC INVESTMENTS R achel E. K ranton and Debor ah F. Mi nehart January 2 002 Abstract : Are vertical merg ers e±cient or restra ints to trade? This paper examines this longsta nding question in a new setting and rea ches new concl usio ns. We co nsider a reali stic environment where downstrea m ¯rms ca n make speci¯c investments in several suppliers at on ce. In keeping with the Chicago S choo l" of regula tio n, we a ssume inputs are excha nged e±ciently regardless of the ownership structu re. Nevertheless, we ¯nd that vertical merger can be ine±cient. A merged ¯rm has an incentive to manipula te its ex ante investments to increase the ex p ost revenu es o f its supply unit. It will increase its investment in its internal supplier and decrease its investment in a n externa l suppl ier relative to Ebook Relate: vertical ebook investments ebook foreclosure ebook investment ebook specific ebook foreclosure and ebook its investment ebook and specific ebook vertical foreclosure ebook |
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