VERTICAL INTER-COMPANY INTERACTIONS WITH CONTROLLABLE PRICE-MARGIN
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VERTICAL INTER-COMPANY INTERACTIONS WITH CONTROLLABLE PRICE-MARGIN
Annotation
PII
S042473880000616-6-1
Publication type
Article
Status
Published
Pages
112-133
Abstract

The mechanism of transactions between vertically connected firms with a controllable price-margin is offered and researched. The controllable price-margin is determined by the marginalization coefficient equal to the relation of the product price to average costs of the supplier. Models and the equations of vertical oligopolies balance before integration of manufacturers intermediate and an end-product and as a result applications of the contract form of transactions between the enterprises for the price below market and availability of the compensating transfer paid by the manufacturer of an end-product are developed. The bottom and top borders of margin factor are defined. While the margin factor decrease inside this interval, the profit of each firm applying the offered form of interaction, synergy effect and benefit of consumers increase from the values corresponding to absence of vertical control to the maximum sizes reached in case of creation by the supplier and the consumer of integrated firm.

Keywords
inter-company interactions, vertical integration, price-margin, balance of vertical oligopolies, contract price, synergy effect
Date of publication
01.10.2014
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0
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61
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