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- Title
Vertical shareholding, vertical product differentiation and social welfare.
- Authors
Wang, Xingtang; Wang, Leonard F. S.
- Abstract
A vertically related market with vertical product differentiation is used to analyze the impact of vertical cross‐ownership on industry profit, consumer surplus and social welfare. With forward cross‐ownership, we find that when the upstream firm holds the share of the low‐quality downstream firm, the industry profit is increasing (decreasing) in the cross‐ownership if the product quality difference is large (small). When the upstream firm holds the share of the high‐quality downstream firm, the industry profit is increasing in the cross‐ownership. The cross‐ownership will lead to a higher consumer surplus and social welfare no matter the type of vertical cross‐ownership. We also consider the scenario that the upstream firm holds the share of both downstream firms.
- Subjects
PRODUCT differentiation; SOCIAL services; DIFFERENTIATION (Sociology); CONSUMERS' surplus; PRODUCT quality
- Publication
Metroeconomica, 2023, Vol 74, Issue 3, p478
- ISSN
0026-1386
- Publication type
Article
- DOI
10.1111/meca.12424