Vertical Market Participation


Firms that operate at both levels of vertically related Cournot oligopolies will purchase some input supplies from independent rivals, even though they can produce the good at a lower cost, driving up input price for nonintegrated firms at the final good level. Foreclosure, which avoids this strategic behavior, yields better market performance than Cournot beliefs.

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Schrader, A., Martin, S. Vertical Market Participation. Review of Industrial Organization 13, 321–331 (1998).

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  • Bertrand reactions
  • Cournot reactions
  • integrated firms
  • vertical market