Vertical integration in environments without foreclosure, or more generally without any obstacles that restrict competition in the market, and subsidization of firms are two separate mechanisms that have pro-competitive effects. In this paper we show that subsidization can corrode the positive welfare effects of vertical integration, as the latter induces the government to subsidize firms’ output to a lesser extent. This causes an output reduction that lowers consumer surplus.

Vertical integration under optimal taxation: a consumer surplus detrimental result

Giuranno, Michele Giuseppe
Membro del Collaboration Group
2023-01-01

Abstract

Vertical integration in environments without foreclosure, or more generally without any obstacles that restrict competition in the market, and subsidization of firms are two separate mechanisms that have pro-competitive effects. In this paper we show that subsidization can corrode the positive welfare effects of vertical integration, as the latter induces the government to subsidize firms’ output to a lesser extent. This causes an output reduction that lowers consumer surplus.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11587/476924
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