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Vertical separation as a defense against strong suppliers

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Listed author(s):
  • Matsushima, Noriaki
  • Mizuno, Tomomichi

Abstract

We provide a simple model to investigate decisions about vertical separation. The key feature of this model is that more than one input is required for the final product of the downstream monopolist. We show that as the bargaining powers of independent complementary input suppliers grow larger, the downstream monopolist tends to separate from its input units. The results are related to a visible difference between the vertical structures of Japanese and US auto assemblers.

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File URL: http://www.sciencedirect.com/science/article/pii/S0377221713000842
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Article provided by Elsevier in its journal European Journal of Operational Research.

Volume (Year): 228 (2013)
Issue (Month): 1 ()
Pages: 208-216

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Handle: RePEc:eee:ejores:v:228:y:2013:i:1:p:208-216
DOI: 10.1016/j.ejor.2013.01.037
Contact details of provider: Web page: http://www.elsevier.com/locate/eor

Keywords: Multiple inputs; Bargaining; Disintegration; Double marginalization; Organization theory; Economics;

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Cited by:

  1. Hiroshi Kitamura & Noriaki Matsushima & Misato Sato, 2015. "Exclusive Contracts with Complementary Inputs," ISER Discussion Paper 0918r, Institute of Social and Economic Research, Osaka University, revised Sep 2015.
  2. Matsushima Noriaki & Mizuno Tomomichi, 2012. "Equilibrium Vertical Integration with Complementary Input Markets," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-32, June.
  3. repec:dpr:wpaper:0918 is not listed on IDEAS
  4. Noriaki Matsushima & Tomomichi Mizuno, 2010. "How do market structures affect decisions on vertical integration/separation?," ISER Discussion Paper 0770, Institute of Social and Economic Research, Osaka University.
  5. Chun-Hung Chen, 2016. "Trade Policies for Intermediate Goods under International Interdependence," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 12(2), pages 227-249, August.
  6. Matsui, Kenji, 2016. "Asymmetric product distribution between symmetric manufacturers using dual-channel supply chains," European Journal of Operational Research, Elsevier, vol. 248(2), pages 646-657.
  7. Matsui, Kenji, 2017. "When should a manufacturer set its direct price and wholesale price in dual-channel supply chains?," European Journal of Operational Research, Elsevier, vol. 258(2), pages 501-511.
  8. Noriaki Matsushima & Fumitoshi Mizutani, 2011. "Market Size and Vertical Structure in the Railway Industry," ISER Discussion Paper 0820, Institute of Social and Economic Research, Osaka University.

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