PROBING PARTIAL CHAINING UNDER SPATIAL COMPETITION IN VERTICAL MARKET STRUCTURE

Authors: Tohru Wako¹; Hiroshi Ohta²

Source: Review Of Urban & Regional Development Studies, Volume 16, Number 2, July 2004 , pp. 170-187(18)

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Abstract:

This paper probes impacts of partial chaining upon the cost structures of not only the chained and independent distributors under spatial competition, but also the monopolistic producer who manages differentiated distribution channels for heterogeneous retailers simultaneously. We assume vertically related but decentralized markets in upstream and downstream stages. Upon chaining, market areas of each chained (independent) store increase (decrease), the related retail prices decline (rise) and profits increase (decrease). Chaining also tends to lower the wholesale prices for the chain stores generally. While aggregate consumer surplus increases, profit for the producer not even directly chained also increases. Social surplus increases with chaining at the expense, however, of not only the remaining independent stores and their customers, but also the chain store's own customers partly at the market periphery.

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1467-940X.2004.00086.x

Affiliations: 1: Dept. of Economics, Tohoku Gakuin University, Sendai, Japan 2: School of International Politics, Economics and Business, Aoyama Gakuin University, Tokyo, Japan

Publication date: 2004-07-01