Thursday, November 15, 2012

Oligopoly and Vertical Relations

The Wall Street Journal has an exceptional article that fits well with the oligopoly vertical relations model presented in Industry Analysis.  Apple and Google used to be vertically integrated in terms of mobile mapping apps with the IPad and IPod, but Apple is now using its own mobile map technology instead of Google's.  Here we have two firms that were previously vertically integrated now moving toward vertical separation, which is different from the model presented in class - where the incentive is to vertically merge.  Why?  Much has to do with product differentiation, which is not in the model from class, but can have some unique effects in terms of the overall equilibrium among the firms, which seems to be the case here.

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