||Merger and collusion has become a popular and widespread activity between firms in the recent years. By doing this, firms can involve all the values which was created by their own factories to themselves. Manufacturers can not only raise their own profits but also diminish the uncertainty risk of purchasing middle material by vertical integrations. It has become a trend to integrate and collusion between firms. Vertical integrations bring more profits, but it also causes monopoly and forcing out.|
Vertical integrate can raise the market price, and it causes market foreclosure. As a result, the social welfare and the market competitive ability will be affected. General speaking, market foreclosure can be classified into full market foreclosure and partial market foreclosure according to the interrupting level to the middle material market. The manufactures use these two strategies to attain the highest profits.
This article uses the Cournot model of oligopoly competition in successive market, and we use Cournot competition by different stages. We assumed the downstream as the price taker of middle material, and the price of final goods will be different according to the variety and substitution of the products. We figure out the appropriate final quantity and then reverse to the quantity and price of the upstream. We use Avenel and Barlet(2000) analyzing structure of successive market, and considering the most appropriate integrated forms between present and potential firms. Secondly, under a given strategy bundle, we analyze the influence between the final goods substitution and complementary to middle material market and social welfare. We found out the influence to middle material market by the choice of integrated strategy varied by substitution or complementary of final goods.