By C. Wu
During this textual content a few basic concerns about the strategic influence of vertical constructions of corporations are mentioned in a successive oligopoly version. Vertical integration process has been pointed out as one of many key ideas which make sure the luck or failure of firms. Many reviews on vertical integration are in accordance with company reports and interviews with managers. although, the large software of online game concept in enterprise economics permits this learn on vertical integration to be in line with sound theoretic flooring. in addition, the importance of public businesses in a few Western eu economies and the traits of financial transition in japanese Europe justify the efforts to examine vertical integration matters within the combined industry, that is created by way of the participation of a public enterprise into an another way characterized as a successive oligopoly
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Additional info for Strategic Aspects of Oligopolistic Vertical Integration
Once the intermediate input prices are known we can easily determine the actual quantities of these equilibrium outputs as follows: a - 2mcl + mc2 3b a + mcl - 2mc2 3b Because of the uniform input price and the symmetry of the model, we can add up q} and q2 and write the Nash equilibrium output of the downstream industry in a standard Cournot game as 1 2 2(a - me) 3b (1 2) This equation reflects the aggregate optimal response of the downstream firms towards the changes in their marginal costs. The fixed coefficient production technology requires a linear relationship between the output quantity of the final goods and the quantity of intermediate inputs used to produce the final goods.
2 is constructed to highlight the contents and scope of this study. 5 4 3 2 1 Chapter No. 2. Taxonomy o f Oligopolistic Vertical Integration Analysis to Si Strategic Aspects of Oligopolistic Vertical Integration Introduction 5. 23 METHODOLOGY One of the features of this work is the use of noncooperative game theory, which has revolutionized theoretically research in industrial economics. Although controversy continues on the usefulness of game theory in economic analysis, most economists would agree that the introduction of game theoretic concepts into the study of oligopolistic competition has made it possible to analyze in greater depth a whole range of questions that was not previously amenable to economic analysis7.
In a two-stage game, almost perfect information describes a combination of perfect information between stages and complete but imperfect information within each of the separate stages (Tirole, 1988). In our vertical integration game, the firms in both the upstream industry and the downstream industry are assumed to know who their rivals are, what the possible actions they as well as their rivals may take and all the possible outcomes of their actions. In other words, the three conditions for complete information are satisfied in each separate industry.
Strategic Aspects of Oligopolistic Vertical Integration by C. Wu