The Incentive for Integration in Spatial Model

• Main Authors: Nien, Yu-Ju, 粘玉如
• Other Authors: Chen, Yi-Heng
• Format: Others
• Language: zh-TW
• Published: 2001
• Online Access: http://ndltd.ncl.edu.tw/handle/26880087091047640515

碩士 === 淡江大學 === 產業經濟學系 === 89 === Follow Gupta, Heywood and Pal(1999), this paper studies the upstream firm’s incentive for forward integration in a spatially successive monopoly model which the downstream firm uses fixed-proportions technology and faces inelastic demand. The same as Gupta, Heywood and Pal’s, the downstream firm is assumed to be able to choose its location and transportation cost in addition to retail price. However, different from Gupta, Heywood and Pal(1999), the retail price charged is mill price but not delivery price. Then we keep Gupta, Heywood and Pal’s all assumptions, including the delivery pricing method for retailer, to find out if there exists an alternative contract, such as controlling transportation cost directly or imposing frenchise fee, for the upstream firm to attain the vertical integration results. Finally, we extend the model to an upstream monopoly facing a duopoly downstream market, under downstream delivery pricing method. The major conclusions are as follows: (1)When the mill price is applied in the successive monopoly model, the upstream firm may or may not have incentives for vertical integration if the downstream firm have fixed-proportions technology and inelastic demand. (2)When the delivery pricing is applied and the upstream firm controls transportation cost directly, the upstream firm still has a strong incentives for vertical integration. (3)Under the complete information, franchise fee contract will generates efficient results like in vertical integration. (4)When market structure composes of an upstream monopolist and two downstream duopolistic firms, the downstream firms still can use transportation cost as the strategic behavior to force the upstream monopolist to lower its product price. Therefore, the upstream monopolist may have an incentive for vertical integration.