제조업체가 수직적으로 차별화되어 있고, 유통업체가 수평적으로 차별화되어 있는 시장에서 수직적 결합여부에 대하여 분석한다. 한 개의 유통업체에게 공급하는 경우에는 두 제조업체가 모두 수직적으로 결합하지 않거나, 수직적으로 결합하는 두 개의 균형이 존재한다. 제조업체가 두 유통업체에게 공급하는 경우에는 두 제조업체 모두 수직적으로 결합한다. McGuire and Staelin는 수직적 결합여부가 제품간 대체성 및 전략적 보완재 여부에 의존함을 보여준다. 이 논문에서는 결합여부가 거래 유통업체 수에 의해서도 결정됨을 보여준다.
There have been many literatures which analyze the effect of vertical integration in the market with vertical structure. Vertical integration has two effects: efficiency effect and strategic effect. First, vertical integration allows a firm not only to reduce transaction cost but also to experience on-time production and makes quality control or product differentiation easier. Firms may be less flexible, however, as the size of the firm gets bigger, and less efficient due to the secure demand or supply. There are two kinds of strategic effect double marginalization and externality effect. When transaction occurs between independent firms, each firm will impose a mark-up, thus a price will be higher, which is called double marginalization. There are two types of externality effects: vertical and horizontal. Externality effect arises when a firm`s behavior affects the other firm, but the former does not take this into consideration when it makes a decision. If this happens between a upstream and downstream firm, it is vertical externality effect, and double marginalizaion is one example. Horizontal externality effects which arise between either upstream or downstream firms affect prices, quality and promotion level. To solve these externality problems, not only vertical integration but also vertical restraints such as resale price maintenance, exclusive territory or exclusive dealings can be used. McGuire and Staelin analyze the effect of vertical integration when the upstream firm supplies its product through one exclusive downstream firm. They find that product substitutability affects the equilibrium distribution structure in a market with two differentiated upstream firms and two identical downstream firms. For low degrees of substitutability, each upstream firm will integrate vertically. For high degrees of substitutability, they will be more likely not to integrate. Moorthy claims that McGuire and Staelin`s finding depends on the following two factors: the degree of subtitutability between product and strategic complements. First, decentralization cannot be a Nash equlibrium unless unilateral decentralization raises the other upstream firm`s equilibrium retail price when the upstream finns` products are substitutes. Second, unilateral decentralization always raises his own equilibrium consumer price, but whether it raises or lowers the rival`s consumer price depends on whether there are strategic complements or not. He finds that the decentralized downstream firm`s consumer price increases because of a higher marginal cost due to double marginalization. Further, with decentralization, the rival downstream firm`s price also increases in case of strategic complements. With high degree of substitutability, the second effect dominates, thus firms are not integrated. In this paper, I analyze the effect of vertical integration in a successive duopoly market where upstream firms are vertically and downstream firms are horizontally differentiated. As in McGuire and Staelin, I found that there are two symmetric Nash equilibria where upstream firms can be either vertically integrated or separated, and the latter is dominant in that profits are higher. This results comes from two countervailing effects of vertical integration. First, a firm`s price gets lower because of lack of double marginalization. But, this price cut makes the rival`s price lower with strategic complementarity. In fact, the price cut for the integrated firm is higher than for the rival. When the rival firm is not vertically integrated, the price cut of the integrated firm is not large enough for it to make sufficiently more sales, thus a higher profit. Meanwhile, when the rival firm is vertically integrated, the price cut is so large that it can earn a higher profit. I also deal with the case where both upstream firms can supply to both downstream firms. When the self-selection condition is satisfied, consumers with high preference buy high-quality goods and those with low preference buy low-quality goods. Wholesale prices are decided to satisfy self-selection constraints. The degree of vertical differentiation does not affect consumer prices, but the degree of horizontal differentiation does. As a result, both upstream firms will be integrated as the profit increases as much as the profit of a decentralized downstream firms.