An experimental examination of double marginalization and vertical relationships
نویسنده
چکیده
The presence of a vertical externality, and therefore an incentive to integrate or to impose vertical restraints, is investigated in 11 posted-offer experiments. Upstream markets are characterized by a single seller. When the downstream market consists of three firms, there is no evidence of a vertical externality, and behavior is consistent with the vertically integrated outcome. With a single firm downstream, a vertical externality is present and the Nash prediction is supported. An analysis of individual market behavior reveals that firms approximate their best response functions, with some indication that they improve over time. © 2000 Elsevier Science B.V. All rights reserved. JEL classification: L1; D4
منابع مشابه
On the Efficiency of Codeshare Contracts Between Airlines: Is Double Marginalization Eliminated?
The literature on the economics of airline codesharing has suggested that codeshare agreements serve to eliminate double marginalization that exists when unaffiliated airlines independently determine the price for different segments of an interline trip. Using a structural econometric model, this paper investigates whether codeshare contracts do eliminate double marginalization. The results sug...
متن کاملHow to Regulate Vertical Market Structure in Network Industries
This paper analyzes the equilibrium outcomes in a network industry under different vertical market structures. In this industry, an upstreammonopolist operates a network used as an input to produce horizontally differentiated final products that are imperfect substitutes. Three potential drawbacks of market structure regulation are analyzed: (i) double marginalization, (ii) underinvestment, and...
متن کاملExternalities of national pharmaceutical policy when markets are integrated through parallel trade
This paper studies externalities of nationally determined cost-sharing systems, in particular coinsurance rates (patients pay a percentage of the price), under pharmaceutical parallel trade, i.e. trade outside the manufacturers authorized distribution channel, in a two-country model with a vertical distributor relationship. Parallel trade generates a price-decreasing competition e¤ect in the d...
متن کاملThe Impact of Vertical Contracting on Firm Behavior: Evidence from Gasoline Stations
Analyses of organizational form’s impact on economic behavior have been rarer than studies of the determinants of organizational form itself. To fill this gap, I develop a theoretical model tailored to the retail gasoline industry that endogenizes the choice of both organizational form and price. The model predicts that vertical separation should be associated with higher prices due to both eff...
متن کامل