Abstract
This article establishes a causal effect of product market competition on vertical integration. I exploit a hitherto unexplored natural experiment in the U.S. 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's reducing market prices by 32% which decreased the incentive to conduct vertical mergers. I discuss several possible interpretations of these changes.
Original language | English |
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Pages (from-to) | 683-718 |
Journal | Journal of Industrial Economics |
Volume | 65 |
Issue number | 4 |
DOIs | |
Publication status | Published - 18 Dec 2017 |