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Product differentiation in successive vertical oligopolies

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Author Info
Paul Belleflamme
Eric Toulemonde

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Abstract

This is a successive oligopoly model with two varieties of a final product. Downstream firms choose one variety to sell on a final market. Upstream firms specialize in the production of one input specifically designed for one variety, but they also produce the input for the other variety at an extra cost. We show that as more downstream firms choose one particular variety, more upstream firms specialize in the input specific to that variety, and vice-versa. Multiple equilibria may result, and the softening effect of product differentiation on competition might not be strong enough to induce maximal differentiation.

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File URL: http://economics.ca/cgi/xms?jab=v36n3/01.pdf
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Publisher Info
Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 36 (2003)
Issue (Month): 3 (August)
Pages: 523-545
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Handle: RePEc:cje:issued:v:36:y:2003:i:3:p:523-545

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Find related papers by JEL classification:
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

Cited by:
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  1. José Pedro Pontes, 2004. "Agglomeration in a Vertically-linked Oligopoly," Working Papers 2004/06, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
  2. Nisvan Erkal, 2003. "Buyer-Supplier Interaction, Asset Specificity, And Product Choice," Department of Economics - Working Papers Series 885, The University of Melbourne. [Downloadable!]
    Other versions:
  3. Arijit Mukherjee2 & Piercarlo Zanchettin, 2007. "Vertical integration and product innovation," Discussion Papers in Economics 07/12, Department of Economics, University of Leicester. [Downloadable!]
  4. José Pedro Pontes, 2006. "Networks and Firm Location," Working Papers 2006/09, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
    Other versions:
  5. André Rocha & José Pedro Pontes, 2005. "Spatial Cournot Oligopoly with Vertical Linkages," Working Papers 2005/11, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
  6. Jose Pedro Pontes, 2005. "Input Specificity and Location," Working Papers 2005/01, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
  7. Noriaki Matsushima & Tomomichi Mizuno, 2009. "Input specificity and product differentiation," ISER Discussion Paper 0745, Institute of Social and Economic Research, Osaka University. [Downloadable!]
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This page was last updated on 2009-11-25.

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