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

McGowan, Danny

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.

Citation

McGowan, D. (2017). Digging deep to compete: vertical integration, product market competition and prices. Journal of Industrial Economics, 65(4), 683-718. https://doi.org/10.1111/joie.12157

• Journal Article Type: Article
• Acceptance Date: May 6, 2017
• Online Publication Date: Dec 18, 2017
• Publication Date: Dec 18, 2017
• Deposit Date: Oct 11, 2017
• Publicly Available Date: Dec 19, 2019
• Journal: Journal of Industrial Economics
• Print ISSN: 0022-1821
• Electronic ISSN: 1467-6451
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 65
• Issue: 4
• Pages: 683-718
• DOI: https://doi.org/10.1111/joie.12157
• Public URL: https://nottingham-repository.worktribe.com/output/900461
• Publisher URL: http://onlinelibrary.wiley.com/doi/10.1111/joie.12157/full
• Additional Information: This is the peer reviewed version of the following article: McGowan, D. (2017), Digging Deep to Compete: Vertical Integration, Product Market Competition and Prices. J Ind Econ, 65: 683–718. doi:10.1111/joie.12157 which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1111/joie.12157/full This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
• Contract Date: Oct 11, 2017