Vertical Relations and Market Structure
Final Report Abstract
Vertically related markets and intermediation markets are defining features of modern market economies. Issues of market power and how it is exercised require a careful analysis of firms’ strategic incentives which are more subtle and complex compared to those in standard “horizontal” oligopoly models. Research in this project has made potentially important contributions to the literature on vertically related markets and industrial organization more generally. The overarching aim has been to extend the set of formal frameworks. By doing so, we have provided researchers in industrial organization and related fields with a toolkit to understand and analyze observed business strategies and draw inferences about likely effects of policy intervention with a focus on evaluation of traditional antitrust instruments such as the prohibition of certain price and non-price strategies, as well as merger control. As usually happens with ambitious research, a few of the research ideas were dropped at various stages, partly because of unexpected technical problems and partly because the conjectures, while correct under a specific set of circumstances, lacked generality and were dropped in favor of different conjectures which were more robust. In the course of working on this project, a number of new and more promising research ideas were developed and pursued. Research in vertically markets continues to be an active area of research, with many scholars building on the advances made in this project. The PIs themselves are both continuing to pursue research in this area: Peitz is one of the PIs in the project “Platform Markets”. Indeed, platform markets – a particular form of vertically markets – have become increasingly important in the digital economy and attract considerable attention from competition authorities and the general public. Peitz and his co-PIs investigate how business models, limited information, and learning by market participants affect outcomes and social welfare in such markets. In joint work with Roland Strausz of Humboldt University Berlin, Nocke currently investigates collective brand reputation in vertical chains.
Publications
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(2014). Indirect Taxation in Vertical Oligopoly (with Markus Reisinger), Journal of Industrial Economics 62, 709-755
Peitz, Martin and Markus Reisinger
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(2014). Vertical Relations under Credit Constraints. Journal of the European Economic Association 12, 337-367
Nocke, Volker and John Thanassoulis
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(2016). The Strategic Value of Partial Vertical Integration. European Economic Review 89, 284-302
Fiocco, Rafaele
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(2018), A Search Model of Rental Markets: Who Should Pay the Commission? International Journal of Industrial Organization 58, 214-235
Niedermayer, Andras and Chengsi Wang
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(2018). Exclusive Dealing and Vertical Integration in Interlocking Relationships. Journal of Economic Theory 177, 183-221
Nocke, Volker and Patrick Rey
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(2018). On the Effect of Aggregate Uncertainty on Certification Intermediaries’ Incentives to Distort Ratings. European Economic Review 108, 20-48
Loerke, Petra and Andras Niedermayer
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(2020). Entry-Deterring Agency. Games and Economic Behavior 119, 172-188
Loertscher, Simon and Andras Niedermayer
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(2020). Media See-saws: Winners and Losers in Platform Markets. Journal of Economic Theory 186
Anderson, Simon and Martin Peitz
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(2020). Search Platforms: Showrooming and Price Parity Clauses. Rand Journal of Economics 51, 32-58
Wang, Chengsi and Julian Wright
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(2020). Segmentation versus Agglomeration: Competition between Platforms with Competitive Sellers. Journal of Political Economy 128(6)
Karle, Heiko, Martin Peitz, and Markus Reisinger
