Vertical separation as a defense against strong suppliers

Noriaki Matsushima and Tomomichi Mizuno

European Journal of Operational Research, 2013, vol. 228, issue 1, 208-216

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.

Keywords: Multiple inputs; Bargaining; Disintegration; Double marginalization; Organization theory; Economics (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (19)

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Working Paper: Vertical Separation as a Defense against Strong Suppliers (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:228:y:2013:i:1:p:208-216

DOI: 10.1016/j.ejor.2013.01.037

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