Tag: Industrial Organisation

Vertical Integration

Posted on by Rhys Williams

In this post, I want to talk a bit about vertical integration and some cool papers I’ve read on the topic.

To begin with, we can think of a vertical structure being a situation where we have upstream and downstream firms. Upstream firms tend to be manufacturers, or other firms high up in the production process, whilst downstream firms are retailers or firms lower down in the production process. An industry where manufacturers and retailers are non-integrated (separate) can lead to an incentive problem, whereby both firms want/need to make a profit but end up setting too high a price.

Let’s think about this more carefully. [...]

Perfect Competition or Collusion?

Posted on by Rhys Williams

    I recently interviewed for a Cambridge college as part of the undergrad admissions process and one of the questions I asked was as follows:

    “We have a scenario where two shops (e.g. supermarkets) are selling the same product (e.g. chocolate bar) at the same price, does this necessarily mean that collusion is occurring? What other factors might the authority want information on?”

    I find this to be an interesting question, as there isn’t a right or wrong answer and so it allowed applicants to discuss a wide range of economic phenomena, from market structure to pricing decisions and I wanted to elaborate upon a few of these points here. [...]