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Abstract

This paper investigates the pricing and vertical organization of differentiated products under imperfect competition. In a multiproduct context, we examine how substitution/complementarity relationships among products and vertical structures relate to the exercise of market power. The analysis is applied to pricing of U.S. soybean seeds from 2000-2007. We consider two vertical structures: vertical integration and licensing. We find evidence that vertical organization has significant effects on prices. These effects vary depending on the institutional setup and the bundling of genetic material. Our analysis indicates that market concentration analyses that neglect vertical structures would fail to capture the linkages between market structure and pricing. The empirical evidence shows that complementarity and economies of scope can mitigate the price-enhancement associated with market power in a multi-market context.

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