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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.

Suggested Citation

  • 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. Timothy Bresnahan & Jonathan Levin, 2012. "Vertical Integration and Market Structure," Introductory Chapters,in: Robert Gibbons & John Roberts (ed.), The Handbook of Organizational Economics Princeton University Press.
    2. 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.
    3. repec:eee:enepol:v:106:y:2017:i:c:p:148-154 is not listed on IDEAS
    4. 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.
    5. 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.
    6. 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.

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