Abstract
Imperfect competition, imperfect information, disequilibrium, and rationing all induce vertical integration in relatively straightforward ways. But can vertical integration arise when firms are competitive and markets clear rapidly? This paper demonstrates that a vertical equilibrium can be generated when the intermediate market is subject to external fluctuations and when there are economies of coordination for firms which avoid the market via integration. The vertical equilibrium is one in which some firms will be integrated while some will not, despite the fact that all firms are identical. Thus, one need not conclude that differential degrees of integration within industries are the result of differing circumstances among firms.
Original language | English (US) |
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Pages (from-to) | 159-170 |
Number of pages | 12 |
Journal | International Journal of Industrial Organization |
Volume | 2 |
Issue number | 2 |
DOIs | |
State | Published - Jun 1984 |
Externally published | Yes |
ASJC Scopus subject areas
- Aerospace Engineering
- Economics and Econometrics
- Economics, Econometrics and Finance (miscellaneous)
- Industrial relations
- Industrial and Manufacturing Engineering
- Strategy and Management