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Vertikal verbundene Märkte im Raum / Vertical Integration in Spatial Markets

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  • Schöler Klaus

    (Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät, Lehrstuhl für Volkswirtschaftslehre, insbesondere Wirtschaftstheorie, Postfach 601553, D-14415 Potsdam)

Abstract

Are there individual and/or overall economic incentives for vertical integration in a two-stage spatial Market? In order to give an answer to this question, we present a model with retail locations arranged at similar distances along a circular line and a monopolistic supplier in the center of the circle. Two cases are discussed in this paper: In the first case, the retailers and the producer are legally and organizationally independent enterprises with isolated individual profit maximization. In the second case, the markets are vertically integrated. It can be shown that in all markets the profits are higher in the second case. Furthermore, in the first case, the higher retail price leads to a lower consumers' surplus and, therefore, to smaller welfare effects than in the second case. In the presented model, there are strong incentives for vertical integration of the firms.

Suggested Citation

  • Schöler Klaus, 2001. "Vertikal verbundene Märkte im Raum / Vertical Integration in Spatial Markets," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 221(4), pages 394-403, August.
    • Handle: RePEc:jns:jbstat:v:221:y:2001:i:4:p:394-403
    DOI: 10.1515/jbnst-2001-0404
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    References listed on IDEAS

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    1. Perry, Martin K., 1989. "Vertical integration: Determinants and effects," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 4, pages 183-255, Elsevier.
    2. G.F. Mathewson & R.A. Winter, 1984. "An Economic Theory of Vertical Restraints," RAND Journal of Economics, The RAND Corporation, vol. 15(1), pages 27-38, Spring.
    3. Bittlingmayer, George, 1983. "A Model of Vertical Restriction and Equilibrium in Retailing," The Journal of Business, University of Chicago Press, vol. 56(4), pages 477-496, October.
    4. Gupta, Barnali & Heywood, John S. & Pal, Debashis, 1995. "Strategic behavior downstream and the incentive to integrate: A spatial model with delivered pricing," International Journal of Industrial Organization, Elsevier, vol. 13(3), pages 327-334, September.
    5. Reiffen, David & Levy, David T., 1989. "Vertical integration in a spatial setting : Inplications of the successive monopoly distortion," Economics Letters, Elsevier, vol. 29(1), pages 77-81.
    6. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 2, number 2.
    7. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 1, number 1.
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    Cited by:

    1. John S. Heywood & Zheng Wang, 2023. "An upstream monopoly with transport costs," Journal of Economics, Springer, vol. 139(2), pages 159-176, July.
    2. Markus Ksoll & Klaus Schöler, 2001. "Alternative Organisation zweistufiger Strommmärkte - Ein räumliches Marktmodell bei zweidimensionaler Verteilung der Nachfrage -," Volkswirtschaftliche Diskussionsbeiträge 47, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät.

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