Re: Health Insurance Co's Buying Physicians and Hospitals

[Guest guest]

Vertical integration From Wikipedia, the free encyclopedia:

In microeconomics and management, the term vertical integration describes a

style of management control. Vertically integrated companies in a supply chain

are united through a common owner. Usually each member of the supply chain

produces a different product or (market-specific) service, and the products

combine to satisfy a common need.

It is contrasted with horizontal integration.

Vertical integration is one method of avoiding the hold-up problem. A

MONOPOLY...[emphasis mine]...produced through vertical integration is called a

vertical MONOPOLY...[emphasis mine]...although it might be more appropriate to

speak of this as some form of CARTEL...[emphasis mine].

Nineteenth century steel tycoon ANDREW CARNEGIE...[emphasis mine]... introduced

the concept and use of vertical integration...

http://en.wikipedia.org/wiki/Vertical_integration

....a monopoly should be distinguished from a cartel (a form of oligopoly), in

which several providers act together to coordinate services, prices or sale of

goods. Monopolies, monopsonies and oligopolies are all situations where one or a

few of the entities have market power and therefore must interact with their

customers (monopoly), suppliers (monopsony) and the other firms (oligopoly) in a

game theoretic manner - meaning that expectations about their behavior affects

other players' choice of strategy and vice versa. This is to be contrasted with

the model of perfect competition where firms are price takers and do not have

market power.

When not legally coerced to do otherwise, monopolies typically produce fewer

goods and sell them at higher prices than under perfect competition to maximize

their profit at the expense of consumer satisfaction...

http://en.wikipedia.org/wiki/Monopoly