Verticle Monopoly Market

Charles Holt

Industrial Organization
Market Structure

Experiment Software

This program uses an interactive web-based interface to run a set of vertically related markets, as described in a 2003 discussion paper: "Double Monopoly: A Classroom Experiment," by Narine Badasyan, Jacob Goeree, Monica Hartmann, Charles Holt, John Morgan, Tanya Rosenblat, and Dirk Yandell. The first mover (wholesaler) in each group selects a wholesale price, and the second movers (retail monopolists in local markets) choose their whole purchase quantities and retail price levels. The equilibrium for vertically related monopolists produces a quantity restriction, even relative to a vertically integrated monopolist, and therefore, the vertical integration "solution" can be implemented in a second treatment option. A third treatment option lets the wholesaler set a wholesale price and a fixed franchise fee, which in theory, can also "solve" the vertical monopoly problem.