You could say there are two kinds of monopolies -- horizontal and vertical. In a horizontal monopoly, you control all the business at that stage of marketing: If you are the supplier or manufacturer, you are the only supplier or manufacturer. If you are the retail outlet, you are the only retail outlet..
Vertical monopolies differ in that they control the product all the way (or much of the way) from creation of the product to sale of the product: They are the manufacturer, the distributor, and the retailer.
Some monopolies are both horizontal and vertical, perhaps most of them.
When we think of a monopoly, it is the horizontal variety we usually envision. But the vertical version also deserves attention, also. Oil companies have vertical tendencies. They might not always control the product start to finish, but there is a lot of that going on. Fast-food chains often distribute their own product, so that would be a partial vertical monopoly. Fast-food chains aren't so inclined to own their own livestock companies, so they are not fully vertical.
Just as horizontal monopolies can lead to higher prices, so can vertical monopolies. If a distributor is selecting product from a number of companies, it can choose the one with the lowest price. But, if the manufacturer and distributor are the same company, no such restraint on price occurs.
No comments:
Post a Comment