The Study, Based On The Vertical Integration Of Upstream Enterprises

Being an important means to enlarge rapidly for firms, merger has been watched out by academia, firms and governments. Vertical merger, one of three mergers means, is likely to raise inputs' and outputs' prices, and then reduce society welfare as it has promoted the rapid growth of firms and economy greatly. So it has negative effects on competition. Based on the current situation of vertical merger theories, and the theory on raising rivals' costs in frame of industry organization theory, this dissertation analyzed the merger effects. And vertical merger model is set up in a successive duopolistic market structure with game theory, differential calculus and so on. Introducing differentiated inputs, interior asymmetry prices between the vertical integrated firms, and taking into account upstream rivals' potential countermergering measure through mergering unintegrated downstream firm, this dissertation studied deeply the change of inputs' price, reaction of firms on vertical merger, and influences of differentiated products and asymmetry information on above cases at equilibrium points. We find that upstream firms' forward integration will lead to the countermergering by rivals, and then induces the bandwagon effect. Furthermore, it causes the inputs' prices to reduce and accordingly lessens the total costs of the downstream firms. As thus it is likely to lower outputs' prices, and has positive effects to a certain extent. The results have lots of theoretic, practical values, and political significances by introducing a new research point of view on vertical merger.The summary of innovations in this dissertation is as following:(1) This text considered dynamically the vertical merger action, namely the countermergering measure taken by rivals. The conclusion indicates that upstream firms' forward integration will lead to the countermergering by rivals, and thus induces the bandwagon effect.(2) Vertical merger causes the inputs' prices to reduce unequally at equilibrium points, which is likely to decrease outputs' prices. Accordingly it has positive effects to a certain extent. (3) This text studied the asymmetry or imperfect information of prices between the vertical integrated firms. Even though the study about transfer pricing in an intermediated market was very comprehensive and profound before, it was rarely involved in frame of vertical merger. This dissertation suggests that just about this kind of asymmetry information affected the inputs' prices and firms' motives of vertical merger.