Vertical Integration in the Presence of Upstream Competition

We analyze vertical integration in the case of upstream competition and compare outcomes to the case where upstream assets are owned by a single agent (i.e., upstream monopoly). In so doing, we make two contributions to the modelling of strategic vertical integration. First, we base industry structure – namely, the ownership of assets – firmly within the property rights approach to firm boundaries. Second, we model the potential multilateral negotiations using a fully specified, non-cooperative bargaining model designed to easily compare outcomes achieved under upstream competition and monopoly. Given this, we demonstrate that vertical integration can alter the joint payoff of integrating parties in ex post bargaining; however, this bargaining effect is stronger for firms integrating under upstream competition than upstream monopoly. We also consider the potential for integration to internalize competitive externalities in a manner that cannot be achieved under non-integration; i.e., by favouring internal over external supply. We demonstrate that ex post monopolization is more likely to occur when there is an upstream monopoly than when there is upstream competition. Our general conclusion is that the simple intuition that the presence of upstream competition can mitigate and reduce the incentives for socially undesirable vertical integration is misplaced and, depending upon the strength of downstream competition (i.e., product differentiation), the opposite could easily be the case. Journal of Economic Literature Classification Number: L42vertical integration, foreclosure, monopolization, bargaining,competition.

AK2 deficiency compromises the mitochondrial energy metabolism required for differentiation of human neutrophil and lymphoid lineages

Reticular dysgenesis is a human severe combined immunodeficiency that is primarily characterized by profound neutropenia and lymphopenia. The condition is caused by mutations in the adenylate kinase 2 (AK2) gene, resulting in the loss of mitochondrial AK2 protein expression. AK2 regulates the homeostasis of mitochondrial adenine nucleotides (ADP, ATP and AMP) by catalyzing the transfer of high-energy phosphate. Our present results demonstrate that AK2-knocked-down progenitor cells have poor proliferative and survival capacities and are blocked in their differentiation toward lymphoid and granulocyte lineages. We also observed that AK2 deficiency impaired mitochondrial function in general and oxidative phosphorylation in particular - showing that AK2 is critical in the control of energy metabolism. Loss of AK2 disrupts this regulation and leads to a profound block in lymphoid and myeloid cell differentiation

Vertical Coordination Through Renegotiation

This paper analyzes the strategic use of bilateral supply contracts in sequential negotiations between one manufacturer and two differentiated retailers. Allowing for general contracts and retail bargaining power, I show that the first contracting parties have incentives to manipulate their contract to shift rent from the second contracting retailer and these incentives distort the industry profit away from the fully integrated monopoly outcome. To avoid such distortion, the first contracting parties may prefer to sign a contract which has no commitment power and can be renegotiated from scratch should the manufacturer fail in its subsequent negotiation with the second retailer. Renegotiation from scratch induces the first contracting parties to implement the monopoly prices and might enable them to capture the maximized industry profit. A slotting fee, an up-front fee paid by the manufacturer to the first retailer, and a menu of tariff-quantity pairs are sufficient contracts to implement the monopoly outcome. These results do not depend on the type of retail competition, the level of differentiation between the retailers, the order of sequential negotiations, the level of asymmetry between the retailers in terms of their bargaining power vis-à-vis the manufacturer or their profitability in exclusive dealing

Lysosomes in iron metabolism, ageing and apoptosis

The lysosomal compartment is essential for a variety of cellular functions, including the normal turnover of most long-lived proteins and all organelles. The compartment consists of numerous acidic vesicles (pH ∼4 to 5) that constantly fuse and divide. It receives a large number of hydrolases (∼50) from the trans-Golgi network, and substrates from both the cells’ outside (heterophagy) and inside (autophagy). Many macromolecules contain iron that gives rise to an iron-rich environment in lysosomes that recently have degraded such macromolecules. Iron-rich lysosomes are sensitive to oxidative stress, while ‘resting’ lysosomes, which have not recently participated in autophagic events, are not. The magnitude of oxidative stress determines the degree of lysosomal destabilization and, consequently, whether arrested growth, reparative autophagy, apoptosis, or necrosis will follow. Heterophagy is the first step in the process by which immunocompetent cells modify antigens and produce antibodies, while exocytosis of lysosomal enzymes may promote tumor invasion, angiogenesis, and metastasis. Apart from being an essential turnover process, autophagy is also a mechanism by which cells will be able to sustain temporary starvation and rid themselves of intracellular organisms that have invaded, although some pathogens have evolved mechanisms to prevent their destruction. Mutated lysosomal enzymes are the underlying cause of a number of lysosomal storage diseases involving the accumulation of materials that would be the substrate for the corresponding hydrolases, were they not defective. The normal, low-level diffusion of hydrogen peroxide into iron-rich lysosomes causes the slow formation of lipofuscin in long-lived postmitotic cells, where it occupies a substantial part of the lysosomal compartment at the end of the life span. This seems to result in the diversion of newly produced lysosomal enzymes away from autophagosomes, leading to the accumulation of malfunctioning mitochondria and proteins with consequent cellular dysfunction. If autophagy were a perfect turnover process, postmitotic ageing and several age-related neurodegenerative diseases would, perhaps, not take place

What Factors Determine the Number of Trading Partners?

The purpose of the paper is to provide a simple model explaining buyer-supplier relationships and show what factors determine the number of trading partners. We show that when the supplier is able to determine the number of trading partners, the optimal number is small if the supplier's bargaining power with them is weak, the economy of scope in the supplier's variable costs is significant, and that in its sunk investment is weak. Investment may be greater when the number of trading partners is small. The results may be consistent with the formation of Japanese buyer-supplier relations

Equilibrium Selection in Sequential Games with Imperfect Information

Games with imperfect information often feature multiple equilibria, which depend on beliefs off the equilibrium path. Standard selection criteria such as passive beliefs, symmetric beliefs or wary beliefs rest on ad hoc restrictions on beliefs. We propose a new selection criterion that imposes no restrictions on beliefs: we select the action profile that is supported in equilibrium by the largest set of beliefs. We conduct experiments to test the predictive power of the existing and our novel selection criteria in two applications: a game of vertical multi-lateral contracting, and a game of electoral competition. We find that our selection criterion outperforms the other selection criteria