Competition used to be extraneous to the firm - now it is commonly an
internal affair among autonomous units within a loose overall
structure. This is how Jack "neutron" Welsh deliberately structured
General Electric. AOL-Time Warner hosts many competing units, yet no
one ever instructs them either to curb this internecine competition, to
stop cannibalizing each other, or to start collaborating
synergistically. The few mammoth agencies that rule the world of
advertising now host a clutch of creative boutiques comfortably
ensconced behind Chinese walls. Such outfits often manage the accounts
of competitors under the same corporate umbrella.
Most firms act as intermediaries. They consume inputs, process them,
and sell them as inputs to other firms. Thus, many firms are
concomitantly consumers, producers, and suppliers. In a paper published
last year and titled "Productive Differentiation in Successive Vertical
Oligopolies", that authors studied:
"An oligopoly model with two brands. Each downstream firm chooses one
brand to sell on a final market. The upstream firms specialize in the
production of one input specifically designed for the production of one
brand, but they also produce he input for the other brand at an extra
cost.
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