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Input Prices as Signals of Costs to a Downstream Rival and Customer

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  • Pei-Cheng Liao

Abstract

type="main"> We consider a dual distribution channel in which a vertically integrated manufacturer competes with a downstream rival in a retail market and also sells an input to the rival. We use a signalling model with a continuum of types to examine a situation in which the manufacturer has private information on the production cost of its retail product. We show that in a separating equilibrium under Cournot (Bertrand) retail competition, the manufacturer signals the uncompetitiveness (competitiveness) of its firm by charging a smaller input price than the optimal price under complete information.

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  • Pei-Cheng Liao, 2014. "Input Prices as Signals of Costs to a Downstream Rival and Customer," The Japanese Economic Review, Japanese Economic Association, vol. 65(3), pages 414-430, September.
    • Handle: RePEc:bla:jecrev:v:65:y:2014:i:3:p:414-430
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    File URL: http://hdl.handle.net/10.1111/jere.12020
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    References listed on IDEAS

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    Cited by:

    1. Cong Pan, 2016. "Retailer’s product line choice with manufacturer’s multichannel marketing," ISER Discussion Paper 0976, Institute of Social and Economic Research, Osaka University.

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