This program sets up a class of vertically related markets, as described in
"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, but "fairness" considerations
tend to interfere with this solution to the double marginalization problem.
|The vertical monopoly game is appropriate for
a wide range of microeconomics and industrial organization classes. The data graphs produce MR and MC lines for both upstream and downstream producers; these lines can be hidden or shown during class discussion.
Vecon Lab - February 25, 2024