Vertical Integration

14,000,000 Leading Edge Experts on the ideXlab platform

Scan Science and Technology

Contact Leading Edge Experts & Companies

Scan Science and Technology

Contact Leading Edge Experts & Companies

The Experts below are selected from a list of 288 Experts worldwide ranked by ideXlab platform

Gilles Chemla - One of the best experts on this subject based on the ideXlab platform.

  • Hedging and Vertical Integration in Electricity Markets
    2011
    Co-Authors: René Aïd, Gilles Chemla, Arnaud Porchet, Nizar Touzi
    Abstract:

    This paper analyzes the interactions between competitive (wholesale) spot, retail, and forward markets and Vertical Integration in electricity markets. We develop an equilibrium model with producers, retailers, and traders to study and quantify the impact of forward markets and Vertical Integration on prices, risk premia and retail market shares. We point out that forward hedging and Vertical Integration are two separate mechanisms for demand and spot price risk diversification that both reduce the retail price and increase retail market shares. We show that they differ in their impact on prices and firms' utility due to the asymmetry between production and retail segments. Vertical Integration restores the symmetry between producers' and retailers' exposure to demand risk while linear forward contracts do not. Vertical Integration is superior to forward hedging when retailers are highly risk averse. We illustrate our analysis with data from the French electricity market.

  • Hedging and Vertical Integration in Electricity Markets
    Management Science, 2011
    Co-Authors: René Aïd, Gilles Chemla, Arnaud Porchet, Nizar Touzi
    Abstract:

    This paper analyzes the interactions between competitive (wholesale) spot, retail, and forward markets and Vertical Integration in electricity markets. We develop an equilibrium model with producers, retailers, and traders to study and quantify the impact of forward markets and Vertical Integration on prices, risk premia, and retail market shares. We point out that forward hedging and Vertical Integration are two separate mechanisms for demand and spot price risk diversification that both reduce the retail price and increase retail market shares. We show that they differ in their impact on prices and firms' utility because of the asymmetry between production and retail segments. Vertical Integration restores the symmetry between producers' and retailers' exposure to demand risk, whereas linear forward contracts do not. Vertical Integration is superior to forward hedging when retailers are highly risk averse. We illustrate our analysis with data from the French electricity market.

  • Hedging and Vertical Integration in Electricity Markets
    Management Science, 2011
    Co-Authors: René Aïd, Gilles Chemla, Arnaud Porchet, Nizar Touzi
    Abstract:

    This paper analyzes the interactions between competitive (wholesale) spot, retail, and forward markets and Vertical Integration in electricity markets. We develop an equilibrium model with producers, retailers, and traders to study and quantify the impact of forward markets and Vertical Integration on prices, risk premia, and retail market shares. We point out that forward hedging and Vertical Integration are two separate mechanisms for demand and spot price risk diversification that both reduce the retail price and increase retail market shares. We show that they differ in their impact on prices and firms' utility because of the asymmetry between production and retail segments. Vertical Integration restores the symmetry between producers' and retailers' exposure to demand risk, whereas linear forward contracts do not. Vertical Integration is superior to forward hedging when retailers are highly risk averse. We illustrate our analysis with data from the French electricity market. This paper was accepted by Wei Xiong, finance.

  • downstream competition foreclosure and Vertical Integration
    Journal of Economics and Management Strategy, 2003
    Co-Authors: Gilles Chemla
    Abstract:

    This paper analyses the impact of competition among downstream firms on an upstream firm's payoff and on its incentive to Vertically integrate when firms on both segments negotiate optimal contracts. We argue that tougher competition decreases the downstream industry profit, but improves the upstream firm's negotiation position. In particular, the upstream firm is better off encouraging competition when the downstream firms have high bargaining power. We derive implications on the interplay between Vertical Integration and competition among the downstream firms. The mere possibility of Vertical Integration may constitute a barrier to entry and may trigger strategic horizontal spin-offs or mergers. We discuss the impact of upstream competition on our results.

  • Competition, Investment and Vertical Integration
    1996
    Co-Authors: Gilles Chemla
    Abstract:

    This paper analyses the impact of competition among downstream firms on a supplier's investment and on her incentive to Vertically integrate. We argue that tougher competition decreases the downstream industry profit, but improved the supplier's negotiation position. In particular, the supplier is better off encouraging competition when the downstream firms have a high bargaining power. Whether Vertical Integration occurs with a concentrated or a competitive downstream market depends on the demand and cost curves, the impact of investment and the bargaining game. The possibility of Vertical Integration may be a barrier to entry and may trigger strategic horizontal spin-offs or mergers.

Nizar Touzi - One of the best experts on this subject based on the ideXlab platform.

  • Hedging and Vertical Integration in Electricity Markets
    2011
    Co-Authors: René Aïd, Gilles Chemla, Arnaud Porchet, Nizar Touzi
    Abstract:

    This paper analyzes the interactions between competitive (wholesale) spot, retail, and forward markets and Vertical Integration in electricity markets. We develop an equilibrium model with producers, retailers, and traders to study and quantify the impact of forward markets and Vertical Integration on prices, risk premia and retail market shares. We point out that forward hedging and Vertical Integration are two separate mechanisms for demand and spot price risk diversification that both reduce the retail price and increase retail market shares. We show that they differ in their impact on prices and firms' utility due to the asymmetry between production and retail segments. Vertical Integration restores the symmetry between producers' and retailers' exposure to demand risk while linear forward contracts do not. Vertical Integration is superior to forward hedging when retailers are highly risk averse. We illustrate our analysis with data from the French electricity market.

  • Hedging and Vertical Integration in Electricity Markets
    Management Science, 2011
    Co-Authors: René Aïd, Gilles Chemla, Arnaud Porchet, Nizar Touzi
    Abstract:

    This paper analyzes the interactions between competitive (wholesale) spot, retail, and forward markets and Vertical Integration in electricity markets. We develop an equilibrium model with producers, retailers, and traders to study and quantify the impact of forward markets and Vertical Integration on prices, risk premia, and retail market shares. We point out that forward hedging and Vertical Integration are two separate mechanisms for demand and spot price risk diversification that both reduce the retail price and increase retail market shares. We show that they differ in their impact on prices and firms' utility because of the asymmetry between production and retail segments. Vertical Integration restores the symmetry between producers' and retailers' exposure to demand risk, whereas linear forward contracts do not. Vertical Integration is superior to forward hedging when retailers are highly risk averse. We illustrate our analysis with data from the French electricity market.

  • Hedging and Vertical Integration in Electricity Markets
    Management Science, 2011
    Co-Authors: René Aïd, Gilles Chemla, Arnaud Porchet, Nizar Touzi
    Abstract:

    This paper analyzes the interactions between competitive (wholesale) spot, retail, and forward markets and Vertical Integration in electricity markets. We develop an equilibrium model with producers, retailers, and traders to study and quantify the impact of forward markets and Vertical Integration on prices, risk premia, and retail market shares. We point out that forward hedging and Vertical Integration are two separate mechanisms for demand and spot price risk diversification that both reduce the retail price and increase retail market shares. We show that they differ in their impact on prices and firms' utility because of the asymmetry between production and retail segments. Vertical Integration restores the symmetry between producers' and retailers' exposure to demand risk, whereas linear forward contracts do not. Vertical Integration is superior to forward hedging when retailers are highly risk averse. We illustrate our analysis with data from the French electricity market. This paper was accepted by Wei Xiong, finance.

Xavier Vives - One of the best experts on this subject based on the ideXlab platform.

  • Excess entry, Vertical Integration, and welfare
    The RAND Journal of Economics, 1999
    Co-Authors: Kai-uwe Kühn, Xavier Vives
    Abstract:

    This article provides a systematic analysis of the welfare effects of Vertical Integration by a monopolist input supplier into a monopolistically competitive downstream industry. We give sufficient conditions on consumer preferences that lead to Pareto-improving Vertical Integration and demonstrate a close relationship between assumptions on preference for variety, excess entry in monopolistically competitive markets, and the welfare effects of Vertical Integration: Excess entry in downstream markets tends to give rise to Pareto-improving Vertical Integration. We extend the analysis to Vertical oligopoly and access price regulation.

  • Excess Entry, Vertical Integration and Welfare
    1995
    Co-Authors: Kai-uwe Kühn, Xavier Vives
    Abstract:

    This paper provides a systematic analysis of the welfare effects of Vertical Integration by a monopolistic input supplier into a monopolistically competitive downstream industry. We give sufficient conditions on consumer preferences that lead to Pareto improving Vertical Integration. We demonstrate a close relationship between assumptions on preference for variety, excess entry in monopolistically competitive markets, and the welfare effects of Vertical Integration. Both excess entry and welfare improving Vertical Integration arise only if preference for variety falls as variety increases for given total output.

René Aïd - One of the best experts on this subject based on the ideXlab platform.

  • Hedging and Vertical Integration in Electricity Markets
    2011
    Co-Authors: René Aïd, Gilles Chemla, Arnaud Porchet, Nizar Touzi
    Abstract:

    This paper analyzes the interactions between competitive (wholesale) spot, retail, and forward markets and Vertical Integration in electricity markets. We develop an equilibrium model with producers, retailers, and traders to study and quantify the impact of forward markets and Vertical Integration on prices, risk premia and retail market shares. We point out that forward hedging and Vertical Integration are two separate mechanisms for demand and spot price risk diversification that both reduce the retail price and increase retail market shares. We show that they differ in their impact on prices and firms' utility due to the asymmetry between production and retail segments. Vertical Integration restores the symmetry between producers' and retailers' exposure to demand risk while linear forward contracts do not. Vertical Integration is superior to forward hedging when retailers are highly risk averse. We illustrate our analysis with data from the French electricity market.

  • Hedging and Vertical Integration in Electricity Markets
    Management Science, 2011
    Co-Authors: René Aïd, Gilles Chemla, Arnaud Porchet, Nizar Touzi
    Abstract:

    This paper analyzes the interactions between competitive (wholesale) spot, retail, and forward markets and Vertical Integration in electricity markets. We develop an equilibrium model with producers, retailers, and traders to study and quantify the impact of forward markets and Vertical Integration on prices, risk premia, and retail market shares. We point out that forward hedging and Vertical Integration are two separate mechanisms for demand and spot price risk diversification that both reduce the retail price and increase retail market shares. We show that they differ in their impact on prices and firms' utility because of the asymmetry between production and retail segments. Vertical Integration restores the symmetry between producers' and retailers' exposure to demand risk, whereas linear forward contracts do not. Vertical Integration is superior to forward hedging when retailers are highly risk averse. We illustrate our analysis with data from the French electricity market.

  • Hedging and Vertical Integration in Electricity Markets
    Management Science, 2011
    Co-Authors: René Aïd, Gilles Chemla, Arnaud Porchet, Nizar Touzi
    Abstract:

    This paper analyzes the interactions between competitive (wholesale) spot, retail, and forward markets and Vertical Integration in electricity markets. We develop an equilibrium model with producers, retailers, and traders to study and quantify the impact of forward markets and Vertical Integration on prices, risk premia, and retail market shares. We point out that forward hedging and Vertical Integration are two separate mechanisms for demand and spot price risk diversification that both reduce the retail price and increase retail market shares. We show that they differ in their impact on prices and firms' utility because of the asymmetry between production and retail segments. Vertical Integration restores the symmetry between producers' and retailers' exposure to demand risk, whereas linear forward contracts do not. Vertical Integration is superior to forward hedging when retailers are highly risk averse. We illustrate our analysis with data from the French electricity market. This paper was accepted by Wei Xiong, finance.

Rocco Macchiavello - One of the best experts on this subject based on the ideXlab platform.

  • FINANCIAL DEVELOPMENT AND Vertical Integration: THEORY AND EVIDENCE
    Journal of the European Economic Association, 2011
    Co-Authors: Rocco Macchiavello
    Abstract:

    Existing evidence is mostly inconclusive on the relevance of financial development as a determinant of Vertical Integration. This paper presents evidence that, once industry heterogeneity in firm size distribution is taken into account, financial development is an important determinant of cross-country differences in Vertical Integration. Financial development fosters entry of firms and increases competition in the industry. This reduces Vertical Integration of larger firms, but also leads smaller, non-integrated, firms to exit the industry. As a result, higher financial development reduces Vertical Integration in industries where a high share of output is produced by small firms. The positive effect of financial development on entry also reduces Vertical Integration by fostering the development of input markets.

  • Vertical Integration and Investor Protection in Developing Countries
    Journal of Development Economics, 2010
    Co-Authors: Rocco Macchiavello
    Abstract:

    The industrial organization of developing countries is characterized by the pervasive use of subcontracting arrangements among small, financially constrained firms. This paper asks whether Vertical Integration relaxes those financial constraints. It shows that Vertical Integration trades off the benefits of joint liability against the costs of rendering the supply chain more opaque to external investors. In contrast to the commonly held view that pervasive input and capital market imperfections are conducive to Vertical Integration, the model predicts that the motives for Vertical Integration are not necessarily higher in developing countries. In particular, Vertical Integration is more likely to arise at intermediate levels of investor protection and better contract enforcement with suppliers reduces Vertical Integration only if financial markets are sufficiently developed. Evidence supporting both predictions is discussed.

  • Financial Constraints and the Costs and Benefits of Vertical Integration
    2007
    Co-Authors: Rocco Macchiavello
    Abstract:

    Does Vertical Integration reduce or increase transaction costs with external investors? This paper analyzes an incomplete contracts model of Vertical Integration in which a seller and a buyer with no cash need to finance investments for production. The firm is modeled as a nexus of contracts across the intermediate input supply and the financing transaction. The costs and benefits of Vertical Integration depend on the relative importance of a positive contractual centralization effect against a negative de-monitoring effect: the firm centrally organizes the nexus of contracts reducing the extent of contractual externalities while the market disciplines decisions driven by private benefits. Larger projects, more specific assets, and low investors protection are determinants of Vertical Integration.