IDEAS home Printed from https://ideas.repec.org/p/dpr/wpaper/0820.html
   My bibliography  Save this paper

Market Size and Vertical Structure in the Railway Industry

Author

Listed:
  • Noriaki Matsushima
  • Fumitoshi Mizutani

Abstract

We provide a theoretical framework to discuss the relation between market size and vertical structure in the railway industry. The framework is based on a simple downstream monopoly model with two input suppliers, labor forces and the rail infrastructure firm. The operation of the downstream firm (i.e., the train operating firm) generates costs on the rail infrastructure firm. We show that the downstream firm with a larger market size is more likely to integrate with the rail infrastructure firm. This is consistent with the phenomenon in the railway industry.

Suggested Citation

  • 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.
  • Handle: RePEc:dpr:wpaper:0820
    as

    Download full text from publisher

    File URL: https://www.iser.osaka-u.ac.jp/library/dp/2011/DP0820.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-1158, December.
    2. Horn, Henrik & Wolinsky, Asher, 1988. "Worker Substitutability and Patterns of Unionisation," Economic Journal, Royal Economic Society, vol. 98(391), pages 484-497, June.
    3. Lommerud, Kjell Erik & Meland, Frode & Straume, Odd Rune, 2009. "Can deunionization lead to international outsourcing?," Journal of International Economics, Elsevier, vol. 77(1), pages 109-119, February.
    4. Matsushima, Noriaki & Mizuno, Tomomichi, 2013. "Vertical separation as a defense against strong suppliers," European Journal of Operational Research, Elsevier, vol. 228(1), pages 208-216.
    5. Kjell Erik Lommerud & Frode Meland & Lars S¯rgard, 2003. "Unionised Oligopoly, Trade Liberalisation and Location Choice," Economic Journal, Royal Economic Society, vol. 113(490), pages 782-800, October.
    6. Chen, Yongmin, 2001. "On Vertical Mergers and Their Competitive Effects," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 667-685, Winter.
    7. Steve Dowrick & Karen Mumford, 1990. "Wage Bargaining with Endogenous Profits, Overtime Working and Heterogeneous Labor," Working Papers 657, Princeton University, Department of Economics, Industrial Relations Section..
    8. Mark Armstrong & Robert Porter (ed.), 2007. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 3, number 1, December.
    9. 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.
    10. Economides, Nicholas & Salop, Steven C, 1992. "Competition and Integration among Complements, and Network Market Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 105-123, March.
    11. Henrick Horn & Asher Wolinsky, 1988. "Bilateral Monopolies and Incentives for Merger," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 408-419, Autumn.
    12. Bonanno, Giacomo & Vickers, John, 1988. "Vertical Separation," Journal of Industrial Economics, Wiley Blackwell, vol. 36(3), pages 257-265, March.
    13. Gal-Or, Esther, 1999. "Vertical integration or separation of the sales function as implied by competitive forces," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 641-662, July.
    14. Géarard Gaudet & Ngo Van Long, 1996. "Vertical Integration, Foreclosure, and profits in the Presence of Double Marginalization," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(3), pages 409-432, September.
    15. Didier Laussel, 2008. "Buying Back Subcontractors: The Strategic Limits of Backward Integration," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(4), pages 895-911, December.
    16. Maruyama, Masayoshi & Minamikawa, Kazumitsu, 2009. "Vertical integration, bundled discounts and welfare," Information Economics and Policy, Elsevier, vol. 21(1), pages 62-71, February.
    17. Noriaki Matsushima, 2009. "Vertical Mergers And Product Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 57(4), pages 812-834, December.
    18. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    19. Dowrick, Steve, 1989. "Union-Oligopoly Bargaining," Economic Journal, Royal Economic Society, vol. 99(398), pages 1123-1142, December.
    20. Yongmin Chen, 2005. "Vertical Disintegration," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 209-229, March.
    21. McAfee, R Preston & Schwartz, Marius, 1994. "Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity," American Economic Review, American Economic Association, vol. 84(1), pages 210-230, March.
    22. Hammond, Peter & Myles, Gareth (ed.), 2000. "Incentives, Organization, and Public Economics: Papers in Honour of Sir James Mirrlees," OUP Catalogue, Oxford University Press, number 9780199242290, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Matsushima, Noriaki & Mizuno, Tomomichi, 2013. "Vertical separation as a defense against strong suppliers," European Journal of Operational Research, Elsevier, vol. 228(1), pages 208-216.
    2. Noriaki Matsushima & Fumitoshi Mizutani, 2014. "How Does Market Size Affect Vertical Structure When Considering Vertical Coordination? Application to the Railway Industry," Pacific Economic Review, Wiley Blackwell, vol. 19(5), pages 657-676, December.
    3. 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.
    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. Kitamura, Hiroshi & Matsushima, Noriaki & Sato, Misato, 2018. "Exclusive contracts with complementary inputs," International Journal of Industrial Organization, Elsevier, vol. 56(C), pages 145-167.
    6. Inés Macho‐Stadler & Noriaki Matsushima & Ryusuke Shinohara, 2021. "Organizational Structure and Technological Investment," Journal of Industrial Economics, Wiley Blackwell, vol. 69(4), pages 785-816, December.
    7. Bakaouka, Elpiniki & Milliou, Chrysovalantou, 2018. "Vertical licensing, input pricing, and entry," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 66-96.
    8. Bas, Maria & Carluccio, Juan, 2009. "Wage bargaining and the boundaries of the multinational firm," LSE Research Online Documents on Economics 28700, London School of Economics and Political Science, LSE Library.
    9. Lin, Ping, 2006. "Strategic spin-offs of input divisions," European Economic Review, Elsevier, vol. 50(4), pages 977-993, May.
    10. Inés Macho-Stadler & Noriaki Matsushima & Ryusuke Shinohara, 2019. "Organizational structure and technological investment," ISER Discussion Paper 1069r, Institute of Social and Economic Research, Osaka University, revised Apr 2020.
    11. Jain, Bharat A. & Kini, Omesh & Shenoy, Jaideep, 2011. "Vertical divestitures through equity carve-outs and spin-offs: A product markets perspective," Journal of Financial Economics, Elsevier, vol. 100(3), pages 594-615, June.
    12. Yasuhiko Nakamura, 2013. "Wage Bargaining And Merger Incentives With Asymmetric Costs," Bulletin of Economic Research, Wiley Blackwell, vol. 65, pages 56-84, May.
    13. Catherine C. de Fontenay & Joshua S. Gans, 2005. "Vertical Integration in the Presence of Upstream Competition," RAND Journal of Economics, The RAND Corporation, vol. 36(3), pages 544-572, Autumn.
    14. Symeonidis, George, 2010. "Downstream merger and welfare in a bilateral oligopoly," International Journal of Industrial Organization, Elsevier, vol. 28(3), pages 230-243, May.
    15. Didier Laussel & Ngo Van Long, 2012. "Vertical Disintegration: A Dynamic Markovian Approach," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 21(3), pages 745-771, September.
    16. Inderst, Roman & Wey, Christian, 2003. "Bargaining, Mergers, and Technology Choice in Bilaterally Oligopolistic Industries," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 1-19, Spring.
    17. Volker Nocke & Lucy White, 2007. "Do Vertical Mergers Facilitate Upstream Collusion?," American Economic Review, American Economic Association, vol. 97(4), pages 1321-1339, September.
    18. Jean‐Etienne De Bettignies, 2006. "Product market competition and boundaries of the firm," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 39(3), pages 948-970, August.
    19. Sapi, Geza, 2012. "Bargaining, vertical mergers and entry," DICE Discussion Papers 61, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    20. Volker Nocke & Lucy White, 2003. "Do Vertical Mergers Facilitate Upstream Collusion? Second Version," PIER Working Paper Archive 05-013, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 08 Mar 2005.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:dpr:wpaper:0820. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/isosujp.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Librarian (email available below). General contact details of provider: https://edirc.repec.org/data/isosujp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.