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Profit raising entry in a vertical structure

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  • Mukherjee, Arijit

Abstract

In contrast to the usual belief, we show that entry in the final goods market increases profits of the incumbent final goods producers if there is free entry in the input market and the final goods are sufficiently differentiated. Thus, we extend Matsushima (2006).

Suggested Citation

  • Mukherjee, Arijit, 2019. "Profit raising entry in a vertical structure," Economics Letters, Elsevier, vol. 183(C), pages 1-1.
    • Handle: RePEc:eee:ecolet:v:183:y:2019:i:c:23
    DOI: 10.1016/j.econlet.2019.108543
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    References listed on IDEAS

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    1. Luciano Fanti & Domenico Buccella, 2017. "The effects of corporate social responsibility on entry," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 44(2), pages 259-266, June.
    2. Rajeev K. Tyagi, 1999. "On the Effects of Downstream Entry," Management Science, INFORMS, vol. 45(1), pages 59-73, January.
    3. Arijit Mukherjee & Laixun Zhao, 2017. "Profit Raising Entry," Journal of Industrial Economics, Wiley Blackwell, vol. 65(1), pages 214-219, March.
    4. Matsushima, Noriaki, 2006. "Industry profits and free entry in input markets," Economics Letters, Elsevier, vol. 93(3), pages 329-336, December.
    5. Naylor, Robin A., 2002. "Industry profits and competition under bilateral oligopoly," Economics Letters, Elsevier, vol. 77(2), pages 169-175, October.
    6. Naylor, Robin, 2002. "The Effects Of Entry In Bilateral Oligopoly," The Warwick Economics Research Paper Series (TWERPS) 638, University of Warwick, Department of Economics.
    7. Luciano Fanti & Domenico Buccella, 2017. "Profit raising entry effects in network industries with Corporate Social Responsibility," Economics and Business Letters, Oviedo University Press, vol. 6(3), pages 59-68.
    8. Fee, C. Edward & Thomas, Shawn, 2004. "Sources of gains in horizontal mergers: evidence from customer, supplier, and rival firms," Journal of Financial Economics, Elsevier, vol. 74(3), pages 423-460, December.
    9. Thomas J. Holmes, 1999. "Localization Of Industry And Vertical Disintegration," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 314-325, May.
    10. Li, Jing, 2013. "Intermediate input sharing in the hospital service industry," Regional Science and Urban Economics, Elsevier, vol. 43(6), pages 888-902.
    11. Andrew Friedson & Jing Li, 2015. "The impact of agglomeration economies on hospital input prices," Health Economics Review, Springer, vol. 5(1), pages 1-15, December.
    12. Arulampalam, W. & Robin A. Naylor & Jeremy P. Smith, 2002. "University of Warwick," Royal Economic Society Annual Conference 2002 9, Royal Economic Society.
    13. Junichiro Ishida & Toshihiro Matsumura & Noriaki Matsushima, 2011. "Market Competition, R&D And Firm Profits In Asymmetric Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 59(3), pages 484-505, September.
    14. Arijit Mukherjee & Udo Broll & Soma Mukherjee, 2009. "The welfare effects of entry: the role of the input market," Journal of Economics, Springer, vol. 98(3), pages 189-201, December.
    15. Ikuo Ishibashi & Noriaki Matsushima, 2009. "The Existence of Low-End Firms May Help High-End Firms," Marketing Science, INFORMS, vol. 28(1), pages 136-147, 01-02.
    16. Naylor, Robin A., 2002. "The effects of entry in bilateral oligopoly," Economic Research Papers 269412, University of Warwick - Department of Economics.
    17. Pal, Debashis & Sarkar, Jyotirmoy, 2001. "A Stackelberg Oligopoly with Nonidentical Firms," Bulletin of Economic Research, Wiley Blackwell, vol. 53(2), pages 127-134, April.
    18. Fanti, Luciano & Meccheri, Nicola, 2014. "Profits and competition under alternative technologies in a unionized duopoly with product differentiation," Research in Economics, Elsevier, vol. 68(2), pages 157-168.
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    Citations

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    Cited by:

    1. Tomomichi Mizuno & Kazuhiro Takauchi, 2024. "Bertrand competition in vertically related markets," Applied Economics Letters, Taylor & Francis Journals, vol. 31(6), pages 524-529, March.
    2. Robin Naylor & Christian Soegaard, 2022. "Profit‐raising entry under oligopolistic trade with endogenous input prices," The World Economy, Wiley Blackwell, vol. 45(7), pages 2135-2164, July.
    3. Yenipazarli, Arda, 2021. "Downstream entry revisited: Economic effects of entry in vertically-related markets," Omega, Elsevier, vol. 103(C).
    4. Jiaxin Han & Chenhang Zeng, 2023. "The effects of downstream entry in a vertical mixed oligopoly: the role of input pricing," Journal of Economics, Springer, vol. 140(1), pages 37-61, September.
    5. Habiger, Peter & Kopel, Michael, 2020. "Strategic delegation in successive oligopolies with differentiated firms," Economics Letters, Elsevier, vol. 194(C).
    6. Duarte Brito & Margarida Catalão-Lopes, 2023. "Profit raising entry under mixed behavior," Journal of Economics, Springer, vol. 138(1), pages 51-72, January.
    7. Tsuyoshi Toshimitsu, 2021. "Note on a profit-raising entry effect in a differentiated Cournot oligopoly market with network compatibility," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 48(2), pages 245-255, June.
    8. Qidi Zhang & Leonard F. S. Wang, 2022. "Taxation, Network Externalities, Consumer Suffering, and Profit-Raising Entry: A Cautionary Note," Journal of Industry, Competition and Trade, Springer, vol. 22(2), pages 225-231, June.
    9. Wu, Jie & Lu, Wei & Ji, Xiang, 2023. "The interactions between upstream quality disclosure and downstream entry," European Journal of Operational Research, Elsevier, vol. 309(2), pages 545-559.

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    More about this item

    Keywords

    Entry; Final goods; Input; Profit;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • 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

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