The effect of vertical integration on consumer price in the presence of inventory costs |
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| Affiliation: | 1. Embrapa Suínos e Aves, BR-153, Km 110, Distrito de Tamanduá Caixa Postal: 321 CEP: 89715-899, Concórdia, SC, Brasil;2. Business Management & Organisation Group, Wageningen University & Research, Hollandseweg 1, 6706 KN, Wageningen, the Netherlands;3. Business Management & Organisation Group, Wageningen University & Research, Hollandseweg 1, 6706 KN, Wageningen, the Netherlands |
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| Abstract: | 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. |
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