Market Size and Vertical Structure in the Railway Industry

24 Pages Posted: 14 Oct 2011

See all articles by Noriaki Matsushima

Noriaki Matsushima

Osaka University - Institute of Social and Economic Research (ISER)

Fumitoshi Mizutani

Kobe University - Graduate School of Business Administration

Date Written: October 7, 2011

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.

Keywords: vertical integration, railway industry, market size, vertical coordination

JEL Classification: L22, L13, R32

Suggested Citation

Matsushima, Noriaki and Mizutani, Fumitoshi, Market Size and Vertical Structure in the Railway Industry (October 7, 2011). The Institute of Social Economic Research Discussion Paper No. 820, Available at SSRN: https://ssrn.com/abstract=1943251 or http://dx.doi.org/10.2139/ssrn.1943251

Noriaki Matsushima (Contact Author)

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan

Fumitoshi Mizutani

Kobe University - Graduate School of Business Administration ( email )

2-1 Rokkodai
Nada-ku
Kobe, Hyogo 657-8501
Japan
+81-78-803-6905 (Phone)
+81-78-803-6977 (Fax)

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