The effect of vertical integration on consumer price in the presence of inventory costs

This paper investigates the effect on consumer price of a vertical merger between a monopolist manufacturer and his retailer, when inventory costs are taken into consideration. We find that the traditional result (lower prices) remains true only when inventory costs are sufficiently small. The direc...

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Bibliographic Details
Published inEuropean journal of operational research Vol. 130; no. 1; pp. 83 - 89
Main Author Reyniers, Diane J
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.04.2001
Elsevier
Elsevier Sequoia S.A
SeriesEuropean Journal of Operational Research
Subjects
Cost analysis
Costs
Double marginalization
Effects
EOQ
Inventory
Inventory management
Mathematical models
Monopolies
Operations research
Theory
Vertical integration
EOQ
Double marginalization
Vertical integration
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Summary:This paper investigates the effect on consumer price of a vertical merger between a monopolist manufacturer and his retailer, when inventory costs are taken into consideration. We find that the traditional result (lower prices) remains true only when inventory costs are sufficiently small. The direction of the price change also depends on the market size.
ISSN:0377-2217
1872-6860
DOI:10.1016/S0377-2217(00)00021-7