Market Size and Vertical Structure in the Railway Industry

Noriaki Matsushima and Fumitoshi Mizutani

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: We provide a theoretical framework to discuss the relation between market size and vertical structure in the railway industry. The framework is based on a simple downstream monopoly model with two input suppliers, labor forces and the rail infrastructure firm. The operation of the downstream firm (i.e., the train operating firm) generates costs on the rail infrastructure firm. We show that the downstream firm with a larger market size is more likely to integrate with the rail infrastructure firm. This is consistent with the phenomenon in the railway industry.

Date: 2011-10
New Economics Papers: this item is included in nep-bec, nep-cis, nep-com and nep-ind
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:0820

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