Strategic vertical integration without foreclosure

Abstract: We determine the endogenous degree of vertical integration in a model of successive oligopoly that captures both efficiency gains and strategic effects. We show that vertical merger waves can be expected to stop by themselves before integration is complete. Consequently, vertical foreclosure plays no significant role in this paper that claims for a soft approach of vertical integration by antitrust authorities. JEL Classification numbers: L22, L40. Key Words: Merger waves, vertical integration, vertical foreclosure