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Ryo Masuyama
 
''Partial forward ownership and upstream quality investment''
( 2022, Vol. 42 No.4 )
 
 
Partial forward ownership has been observed in many industries. We consider a linear city in which upstream firms invest in quality. Partial forward ownership increases the quality investment of an owning upstream firm. Although partial forward ownership increases market concentration and consumer transportation costs, consumer surplus increases because of higher quality. In addition, partial forward ownership increases total surplus if the upstream investment technology is efficient. Conversely, partial forward ownership hurts total surplus if the investment technology of upstream firms is inefficient or if they cannot make the investment. Therefore, the desirability of partial forward ownership depends on the efficiency of upstream investment.
 
 
Keywords: partial ownership, quality investment, vertical relationship, Hotelling model
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
D4 - Market Structure and Pricing: General
 
Manuscript Received : Jun 04 2022 Manuscript Accepted : Dec 30 2022

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