A model of vertical integration and economies of scale in information product distribution

The author investigates theoretical conditions under which vertical integration between a retailer (such as a cable television system, newspaper, or movie theater) with local monopoly power and the upstream supplier of one of the products it offers (such as cable television programming networks, newspaper editorials, or motion pictures) might induce the retailer to alter the prices or the content of its menu. The author then models the relationship between information product retailers and suppliers and shows that integration results in a lower retail price for the vertically affiliated product than for the unaffiliated product.