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Downstream Competition, Bargaining, and Welfare

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  • George Symeonidis

Abstract

"I analyze the effects of downstream competition when there is bargaining between downstream firms and upstream agents (firms or unions). When bargaining is over a uniform input price, a decrease in the intensity of competition (or a merger) between downstream firms may raise consumer surplus and overall welfare. When bargaining is over a two-part tariff, a decrease in the intensity of competition reduces downstream profits and upstream utility and raises consumer surplus and overall welfare. Standard welfare results of oligopoly theory can be reversed: less competition can be unprofitable for firms and/or beneficial for consumers and society as a whole." Copyright 2008 Blackwell Publishing.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

Volume (Year): 17 (2008)
Issue (Month): 1 (03)
Pages: 247-270

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Handle: RePEc:bla:jemstr:v:17:y:2008:i:1:p:247-270

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Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/

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Web: http://www.blackwellpublishing.com/journal.asp?ref=1058-6407&site=1

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References

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  1. Inderst, Roman & Wey, Christian, 2007. "Buyer power and supplier incentives," European Economic Review, Elsevier, vol. 51(3), pages 647-667, April.
  2. Dhillon, Amrita & Petrakis, Emmanuel, 2002. "A generalised wage rigidity result," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 285-311, March.
  3. Fabian BERGÈS & Stéphane CAPRICE, 2008. "Is Competition or Collusion in the Product Market Relevant for Labour Markets?," Discussion Papers (REL - Recherches Economiques de Louvain) 2008032, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  4. Dowrick, Steve, 1989. "Union-Oligopoly Bargaining," Economic Journal, Royal Economic Society, vol. 99(398), pages 1123-42, December.
  5. Roman Inderst & Christian Wey, 2001. "Bargaining, Mergers, and Technology Choice in Bilaterally Oligopolistic Industries," CIG Working Papers FS IV 01-19, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  6. Fershtman, C. & Gandal, N., 1991. "Disadvantageous Semicollusion," Papers 37-91, Tel Aviv.
  7. George Symeonidis, 2000. "Cartel stability with multiproduct firms," Economics Discussion Papers 515, University of Essex, Department of Economics.
  8. Ziss, Steffen, 1995. "Vertical Separation and Horizontal Mergers," Journal of Industrial Economics, Wiley Blackwell, vol. 43(1), pages 63-75, March.
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  10. Lommerud, Kjell Erik & Straume, Odd Rune & Sorgard, Lars, 2005. "Downstream merger with upstream market power," European Economic Review, Elsevier, vol. 49(3), pages 717-743, April.
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  13. Chen, Zhiqi, 2003. " Dominant Retailers and the Countervailing-Power Hypothesis," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 612-25, Winter.
  14. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-40, December.
  15. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-14, May.
  16. Milliou, Chrysovalantou & Petrakis, Emmanuel & Vettas, Nikolaos, 2003. "Endogenous Contracts Under Bargaining in Competing Vertical Chains," CEPR Discussion Papers 3976, C.E.P.R. Discussion Papers.
  17. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
  18. von Ungern-Sternberg, Thomas, 1996. "Countervailing power revisited," International Journal of Industrial Organization, Elsevier, vol. 14(4), pages 507-519, June.
  19. Dobson, Paul W, 1997. "Union-Firm Interaction and the Right to Manage," Bulletin of Economic Research, Wiley Blackwell, vol. 49(3), pages 213-29, July.
  20. Lopez, Monica Correa & Naylor, Robin A., 2004. "The Cournot-Bertrand profit differential: A reversal result in a differentiated duopoly with wage bargaining," European Economic Review, Elsevier, vol. 48(3), pages 681-696, June.
  21. Cyert, Richard M & DeGroot, Morris H, 1973. "An Analysis of Cooperation and Learning in a Duopoly Context," American Economic Review, American Economic Association, vol. 63(1), pages 24-37, March.
  22. George Symeonidis, 2007. "The Effect of Competition on Wages and Productivity: Evidence from the UK," Economics Discussion Papers 626, University of Essex, Department of Economics.
  23. Naylor, Robin A., 2002. "Industry profits and competition under bilateral oligopoly," Economics Letters, Elsevier, vol. 77(2), pages 169-175, October.
  24. Chen, Zhiqi & Ross, Thomas W., 2003. "Cooperating upstream while competing downstream: a theory of input joint ventures," International Journal of Industrial Organization, Elsevier, vol. 21(3), pages 381-397, March.
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Citations

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Cited by:
  1. Kesavayuth, Dusanee & Zikos, Vasileios, 2012. "Upstream and downstream horizontal R&D networks," Economic Modelling, Elsevier, vol. 29(3), pages 742-750.
  2. Chrysovalantou Milliou & Apostolis Pavlou, 2009. "Upstream Horizontal Mergers and Efficiency Gains," CESifo Working Paper Series 2748, CESifo Group Munich.
  3. George Symeonidis, 2009. "Downstream merger and welfare in a bilateral oligopoly," Economics Discussion Papers 671, University of Essex, Department of Economics.
  4. Arijit Mukherjee, 2010. "Product Market Cooperation, Profits and Welfare in the Presence of Labor Union," Journal of Industry, Competition and Trade, Springer, vol. 10(2), pages 151-160, June.
  5. Toshihiro Matsumura & Noriaki Matsushima & Susumu Cato, 2009. "Relative Performance and R&D Competition," ISER Discussion Paper 0752, Institute of Social and Economic Research, Osaka University.
  6. Alberto Iozzi & Tommaso Valletti, 2010. "Vertical bargaining and countervailing power," CEIS Research Paper 160, Tor Vergata University, CEIS, revised 28 May 2010.

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