Vertical Ownership Without Control

Economic Analysis Group Discussion Paper No. 01-6

29 Pages Posted: 29 Jul 2001

See all articles by Patrick Greenlee

Patrick Greenlee

U.S. Department of Justice - Antitrust Division

Alexander Raskovich

U.S. Department of Justice - Economic Analysis Group

Date Written: July 20, 2001

Abstract

When a monopolist sells an input to an oligopoly, consumer and total surplus frequently are invariant to changes in passive ownership of the monopolist by downstream firms. Within broad classes of ownership profiles, strong invariance holds: the input and output choices of downstream firms are invariant to a change within the class. While passive ownership raises input demand, the upstream firm responds by raising price. Strong invariance always holds for bilateral monopoly. For a broad class of models with fixed proportions technologies, aggregate output is invariant across all passive ownership profiles. Passive ownership is privately profitable because it shifts sales from rivals.

Keywords: vertical, partial ownership

JEL Classification: D21, D43, G34, L10, L20, L22, L40

Suggested Citation

Greenlee, Patrick and Raskovich, Alexander, Vertical Ownership Without Control (July 20, 2001). Economic Analysis Group Discussion Paper No. 01-6, Available at SSRN: https://ssrn.com/abstract=278088 or http://dx.doi.org/10.2139/ssrn.278088

Patrick Greenlee

U.S. Department of Justice - Antitrust Division ( email )

600 E Street NW
Suite 10,000
Washington, DC 20530
United States

Alexander Raskovich (Contact Author)

U.S. Department of Justice - Economic Analysis Group ( email )

450 Fifth St. NW
Room 9418
Washington, DC 20530
United States
202-307-6606 (Phone)
202-514-5847 (Fax)

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