Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
This paper shows that a vertically integrated firm has incentives to outsource input production to an equally efficient nonintegrated upstream firm that serves its downstream rival. By outsourcing, it raises both its own and its rivals’ cost and generates softer price competition in the final product market. Both the positive implications of vertical integration on the integrated firm’s profits and its negative implications on consumers and welfare are stronger with outsourcing than with the commonly presumed insourcing.