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Essays on vertical restraints and vertical integration
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Essays on vertical restraints and vertical integration
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ETD_2086
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http://hdl.rutgers.edu/1782.2/rucore10001600001.ETD.000051789
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eng
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theses
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Economics
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Vertical integration
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Competition
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(authority = ETD-LCSH)
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Pricing
Abstract
This dissertation contains three essays which examine vertical integration and vertical restraints. The first essay examines a vertical restraint, Minimum Advertised Price (MAP) which is often observed in vertical relations as a remedy for the horizontal externality in provision of service. Retailers provide a variety of services that affect the sale of their products such as demonstrations and the provision of information and advice. These retail services can generate horizontal externalities among retailers. In such a case, the individual retailer realizes less than the full effect on aggregate profits of his additional retail services and therefore provides less than the optimal level of service. This study shows that MAP can ensure optimal level of service and it duplicates the welfare outcome of vertical integration regardless of the level of service externality.
The second essay explores the private and social desirability of vertical restraints imposed by a manufacturer on its retailers when there is uncertainty in demand or cost. A monopoly manufacturer offers a contract to retailers in an environment where the retailers compete in quantities and possess superior information about local demand conditions or their costs of distribution. Two vertical restraints are studied: Resale Price Maintenance and Exclusive Territories. In particular, this study shows that resale price maintenance and exclusive territories are not substitutes. If the retailers are infinitely risk averse, the manufacturer prefers resale price maintenance under demand uncertainty, and quantity competition under cost uncertainty. However, if the retailers are risk neutral, the manufacturer prefers resale price maintenance regardless of the type of uncertainty.
The last essay examines affiliations that integrate physicians and hospitals. Managed care organizations shifted financial risks to health care providers by changing the payment method from fee-for-service to capitation. Due to this emerging financial risk, one of the strategies that physicians adopted was establishing affiliations with hospitals. This study performs an empirical analysis of the effect of the affiliation types on three important dimensions of health care: quality, cost, and price. The empirical results show that when the affiliation between a hospital and physicians is strong, the integrated organization operates more efficiently than independent hospitals. However, affiliations that weakly integrate hospitals and physicians produce a lower quality of health care with higher cost and price.
The second essay explores the private and social desirability of vertical restraints imposed by a manufacturer on its retailers when there is uncertainty in demand or cost. A monopoly manufacturer offers a contract to retailers in an environment where the retailers compete in quantities and possess superior information about local demand conditions or their costs of distribution. Two vertical restraints are studied: Resale Price Maintenance and Exclusive Territories. In particular, this study shows that resale price maintenance and exclusive territories are not substitutes. If the retailers are infinitely risk averse, the manufacturer prefers resale price maintenance under demand uncertainty, and quantity competition under cost uncertainty. However, if the retailers are risk neutral, the manufacturer prefers resale price maintenance regardless of the type of uncertainty.
The last essay examines affiliations that integrate physicians and hospitals. Managed care organizations shifted financial risks to health care providers by changing the payment method from fee-for-service to capitation. Due to this emerging financial risk, one of the strategies that physicians adopted was establishing affiliations with hospitals. This study performs an empirical analysis of the effect of the affiliation types on three important dimensions of health care: quality, cost, and price. The empirical results show that when the affiliation between a hospital and physicians is strong, the integrated organization operates more efficiently than independent hospitals. However, affiliations that weakly integrate hospitals and physicians produce a lower quality of health care with higher cost and price.
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electronic resource
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ix, 100 p.
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Ph.D.
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Includes bibliographical references (p. 96-99)
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by Volkan Cetinkaya
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Cetinkaya
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Volkan
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1978
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Volkan Cetinkaya
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Perry
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Martin
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Martin K Perry
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Rubin
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Jeffrey
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Jeffrey Rubin
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Campbell
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Colin
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Colin Campbell
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Asher
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Martin
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Martin A Asher
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Rutgers University
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Graduate School - New Brunswick
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2009
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2009-10
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xx
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Rutgers University Electronic Theses and Dissertations
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Graduate School - New Brunswick Electronic Theses and Dissertations
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doi:10.7282/T3G73DX2
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ETD doctoral
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The author owns the copyright to this work
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Open
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Cetinkaya
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Volkan
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Volkan Cetinkaya
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Rutgers University. Graduate School - New Brunswick
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I hereby grant to the Rutgers University Libraries and to my school the non-exclusive right to archive, reproduce and distribute my thesis or dissertation, in whole or in part, and/or my abstract, in whole or in part, in and from an electronic format, subject to the release date subsequently stipulated in this submittal form and approved by my school. I represent and stipulate that the thesis or dissertation and its abstract are my original work, that they do not infringe or violate any rights of others, and that I make these grants as the sole owner of the rights to my thesis or dissertation and its abstract. I represent that I have obtained written permissions, when necessary, from the owner(s) of each third party copyrighted matter to be included in my thesis or dissertation and will supply copies of such upon request by my school. I acknowledge that RU ETD and my school will not distribute my thesis or dissertation or its abstract if, in their reasonable judgment, they believe all such rights have not been secured. I acknowledge that I retain ownership rights to the copyright of my work. I also retain the right to use all or part of this thesis or dissertation in future works, such as articles or books.
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