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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.

Suggested Citation

  • George Symeonidis, 2008. "Downstream Competition, Bargaining, and Welfare," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(1), pages 247-270, March.
    • Handle: RePEc:bla:jemstr:v:17:y:2008:i:1:p:247-270
    DOI: 10.1111/j.1530-9134.2008.00177.x
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