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Vertical integration as a source of hold-up: An experiment

Abstract : In a vertical chain in which two rivals invest before contracting with one of two competing suppliers, vertical integration can create holdup problems for the rival. We develop an experiment to test this theoretical prediction in a setup in which suppliers can either precommit ex ante to being greedy or degrade ex post the input they provide to their customer. Our experimental results confirm that vertical integration creates holdup problems. However, vertical integration also generates more departures from theory, which can be explained by bounded rationality and social preferences.
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https://hal.inrae.fr/hal-03283879
Contributor : Claire Chambolle <>
Submitted on : Monday, July 12, 2021 - 11:39:05 AM
Last modification on : Wednesday, July 14, 2021 - 3:13:06 AM

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Marie-Laure Allain, Claire Chambolle, Patrick Rey, Sabrina Teyssier. Vertical integration as a source of hold-up: An experiment. European Economic Review, Elsevier, 2021, 137 (August), ⟨10.1016/j.euroecorev.2021.103783⟩. ⟨hal-03283879⟩

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