The Growth and Welfare Effects of Vertical Separation versus Vertical Integration

Chi-Ting Chin ()

Journal of Economics and Management, 2014, vol. 10, issue 2, 117-127

Abstract: Bonanno and Vickers (1988) show that vertical separation is profitable and is of interest to manufacturers collectively, as well as individually, provided that the franchise fees can be used to extract the retailers¡¦ surplus. However, their analysis is derived within the goods market only, and hence ignores the harm caused to the community by the double marginalization. This paper develops a simple endogenous growth model with monopolistic competition, in which both structures of vertical integration and vertical separation can be described, and finds that vertical separation reduces both the balanced growth rate and the social welfare.

Keywords: vertical separation; vertical integration; imperfect competition; endogenous growth; social welfare (search for similar items in EconPapers)
JEL-codes: D43 D64 L16 O40 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:jec:journl:v:10:y:2014:i:2:p:117-127

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