A market-power based model of business groups (original) (raw)

Abstract

We propose an model of vertically and horizontally-integrated business groups that allows the number and size of each group to be determined endogenously. We find that more than one configuration of groups can arise in equilibrium: several different types of business groups can occur, each of which are consistent with profit-maximization and are stable. We suggest that the strongly-integrated groups arising in the model characterize the chaebol found in South Korea, whereas the less-integrated groups describe those found in Taiwan. (C)

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