[Séminaire CREM] “Double Marginalization and Vertical Integration”

Abstract:
Asymmetric information in procurement entails double marginalization. The phenomenon is most severe when the buyer has all the bargaining power at the production stage, while it vanishes when the buyer and suppliers' weights are balanced. Vertical integration eliminates double marginalization and reduces the likelihood that the buyer purchases from independent suppliers.Conditional on market foreclosure, the probability that final consumers are harmed is positive only if the buyer has more bargaining power when selecting suppliers than when negotiating over prices and quantities. Otherwise, the buyer's and consumers' interests are aligned.

JEL Classification: L1, L4, D4, D8

Keywords: Asymmetric information, Bargaining, Double marginalization, Optimal procurementmechanism, Vertical merger

Co-écrit avec Philippe Choné et Laurent Linnemer