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Type	Working Paper
Scope	Discipline-based scholarship
Title	Downstream Investment in Oligopoly
Organization Unit	Microeconomics, Industrial Organization, and Environmental Economics (Armin Schmutzler)
Authors	Stefan Buehler Armin Schmutzler
Language	English
Institution	University of Zurich
Series Name	Working paper series / Socioeconomic Institute
Number	No. 310
Date	2003
Abstract Text	We examine cost-reducing investment in vertically-related oligopolies, where firms may be vertically integrated or separated. Analyzing a standard linear Cournot model, we show that: (i) Integrated firms invest more than separated competitors. (ii) Vertical integration increases own investment and decreases competitor investment. (iii) Firms may integrate strategically so as to preempt investments by competitors. Adopting a reduced-form approach, we identify demand/mark-up complementarities in the product market as the driving force for these results. We show that our results generalize naturally beyond the Cournot example, and we discuss policy implications.
Official URL	http://www.econ.uzh.ch/wp.html
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