2019-04-01
Buffer Joint Ventures
Publication
Publication
CEP 19-01
While strategic alliances and joint ventures have become important organizational forms promising a variety of efficiency benefits for the economy, a body of research has been building showing that alliances between competitors can have significant anticompetitive consequences. This paper explores a particular kind of arrangement, here called a “buffer joint venture”, in which parent firms create an entity selling products located between their own locations in product or geographic space. Depending upon the governance structure of the joint venture and the timing of price-setting by the joint venture and its parents, the buffer joint venture may reduce competition between the parents leading to higher prices and profits and lower social welfare. The presence of such a joint venture can also affect the incentives for, and the effects of, collusion by the parents.
Additional Metadata | |
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Department of Economics | |
Carleton Economics Working Papers (CEWP) | |
Organisation | Department of Economics |
Chen, Z, & Ross, Thomas W. (2019). Buffer Joint Ventures (No. CEP 19-01). Carleton Economics Working Papers (CEWP). Department of Economics.
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