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

McGowan, Danny

Authors

Danny McGowan



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), 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
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.

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