Is vertical integration of mines and power plants profitable and for whom? Based on outcomes from the research of bilateral relation between lignite mines and power plant author describes several benefits from vertical integration including strategic benefits described by Porter and benefits from reduction of transactional costs described by Williamson. Additional benefits can be attained by application of open pit optimisation which leads to the solution of modified bilateral monopoly of lignite mine and power plant. Cooperation can assure joint profits maximisation and rivalry leads to suboptimal solution in Pareto sense. Due to asymmetry of information about the deposit the mine has information advantage and can apply its predominant solution maximising only their own profits in long run.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
534.
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