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Discussion Paper Details

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Full Details

Title: Excess Entry, Vertical Integration and Welfare

Author(s): Kai-Uwe Kühn and Xavier Vives

Publication Date: November 1995

Keyword(s): Excess Entry, Preference for Variety and Vertical Integration

Programme Area(s): Industrial Organization

Abstract: This paper provides a systematic analysis of the welfare effects of vertical integration by a monopolistic input supplier into a monopolistically competitive downstream industry. We give sufficient conditions on consumer preferences that lead to Pareto improving vertical integration. We demonstrate a close relationship between assumptions on preference for variety, excess entry in monopolistically competitive markets, and the welfare effects of vertical integration. Both excess entry and welfare improving vertical integration arise only if preference for variety falls as variety increases for given total output.

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Bibliographic Reference

Kühn, K and Vives, X. 1995. 'Excess Entry, Vertical Integration and Welfare'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1293