Digging deep to compete: vertical integration, product market competition and prices

McGowan, Danny (2017) Digging deep to compete: vertical integration, product market competition and prices. Journal of Industrial Economics . ISSN 1467-6451 (In Press)

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Abstract

This article establishes a causal effect of product market competition on vertical integration. I exploit a hitherto unexplored natural experiment in the US coal mining industry and a unique mine-level organizational data set. Following an exogenous increase in product market competition the incidence of vertical integration fell by 33% within the treatment group relative to the counterfactual. I find novel evidence that transition to the lower degree of vertical integration is driven by competition reducing market prices by 32% which decreased the incentive to conduct vertical mergers. I discuss several possible interpretations of these changes.

Item Type: Article
Schools/Departments: University of Nottingham, UK > Faculty of Social Sciences > Nottingham University Business School
Depositing User: Eprints, Support
Date Deposited: 11 Oct 2017 13:28
Last Modified: 13 Oct 2017 16:37
URI: http://eprints.nottingham.ac.uk/id/eprint/47206

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