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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.