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Efficiency and Vertical Integration: The Case of Mine-Mouth Electric Generating Plants

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  • Kerkvliet, Joe

Abstract

This paper tests four propositions regarding the efficiency of vertical arrangements: (1) vertically integrated and nonintegrated firms allocate inputs with efficiency and (2) achieve equal technical efficiency; (3) upstream transaction-specific investments provide monopsony power; and (4) monopsony behavior does not differ by vertical arrangement. A behavioral cost function for mine-mouth generating plants is estimated. The findings include significant differences in the allocative efficiency of integrated versus nonintegrated plants and increased technical efficiency for vertically integrated plants. Transaction-specific investments in mines provide monopsony power. Nonintegrated plants exercise this power, while integrated plants do not. Copyright 1991 by Blackwell Publishing Ltd.

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  • Kerkvliet, Joe, 1991. "Efficiency and Vertical Integration: The Case of Mine-Mouth Electric Generating Plants," Journal of Industrial Economics, Wiley Blackwell, vol. 39(5), pages 467-482, September.
    • Handle: RePEc:bla:jindec:v:39:y:1991:i:5:p:467-82
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    Cited by:

    1. Marissa Beck & Fiona Scott Morton, 2021. "Evaluating the Evidence on Vertical Mergers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 59(2), pages 273-302, September.
    2. Zhang, Vanessa Yanhua & Chen, Yongjun, 2011. "Vertical relationships in China’s electricity industry: The quest for competition?," Utilities Policy, Elsevier, vol. 19(3), pages 142-151.
    3. Fabio Pieri & Enrico Zaninotto, 2013. "Vertical integration and efficiency: an application to the Italian machine tool industry," Small Business Economics, Springer, vol. 40(2), pages 397-416, February.
    4. Timothy Bresnahan & Jonathan Levin, 2012. "Vertical Integration and Market Structure [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    5. Takanori Ida & Tetsuya Kuwahara, 2004. "Yardstick Cost Comparison and Economies of Scale and Scope in Japan's Electric Power Industry," Asian Economic Journal, East Asian Economic Association, vol. 18(4), pages 423-438, December.
    6. Manoranjan Pattanayak Author- Workplace-Name: CRISIL LIMITED & Manoj Pant, "undated". "Corporate Governance, Competition and Firm Performance: Evidence from India," Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi Discussion Papers 10-07, Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi, India.
    7. Francine Lafontaine & Margaret Slade, 2007. "Vertical Integration and Firm Boundaries: The Evidence," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 629-685, September.
    8. Savitski, David W. & Nuryyev, Guych, 2018. "Enhancing electric reliability with storage-field generators," Energy Policy, Elsevier, vol. 121(C), pages 611-620.
    9. Meleshkina, Anna (Мелешкина, Анна) & Shastitko, Anastasia (Шаститко, Анастасия), 2018. "Institutional Initiative of Functioning of Firms in Conditions of a Bilateral Monopoly [Институциональная Инициатива Функционирования Фирм В Условиях Двусторонней Монополии]," Working Papers 041812, Russian Presidential Academy of National Economy and Public Administration.
    10. Giovanni Fraquelli & Davide Vannoni, 1996. "Regulation and Total Productivity in Electricity: A Comparison between Italy, Germany and France," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 65(4), pages 512-524.
    11. Mokhtar Kouki & Sang Park & Eric Renault, 2014. "Estimating scale economies in financial intermediation: a doubly indirect inference," Journal of Productivity Analysis, Springer, vol. 41(3), pages 351-365, June.
    12. Darryl Biggar & Matthieu Glachant & Magnus Söderberg, 2018. "Monopoly regulation when customers need to make sunk investments: evidence from the Swedish district heating sector," Journal of Regulatory Economics, Springer, vol. 54(1), pages 14-40, August.
    13. Cui, Herui & Wei, Pengbang, 2017. "Analysis of thermal coal pricing and the coal price distortion in China from the perspective of market forces," Energy Policy, Elsevier, vol. 106(C), pages 148-154.

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