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Market Size and Vertical Structure in the Railway Industry

  • Noriaki Matsushima
  • Fumitoshi Mizutani

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.

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Paper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0820.

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Date of creation: Oct 2011
Date of revision:
Handle: RePEc:dpr:wpaper:0820
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