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A note on the effects of downstream efficiency on upstream pricing

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  • Koulamas, Christos
  • Kyparisis, George J

Abstract

The study of the effects of downstream entry on upstream pricing has revealed the counter-intuitive result of the supplier's pricing policy being invariant to a new downstream entry under an isoelastic inverse demand function. We show that this counter-intuitive result is reversed when a new downstream entry affects downstream efficiency. We show that in the presence of increased post-entry downstream efficiency the supplier increases the wholesale price by taking advantage of the increased retail efficiency and competition. We also investigate the applicability of our results under other types of inverse demand functions.

Suggested Citation

  • Koulamas, Christos & Kyparisis, George J, 2010. "A note on the effects of downstream efficiency on upstream pricing," European Journal of Operational Research, Elsevier, vol. 200(3), pages 926-928, February.
    • Handle: RePEc:eee:ejores:v:200:y:2010:i:3:p:926-928
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    References listed on IDEAS

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    Cited by:

    1. Cao, Zong-Hong & Zhou, Yong-Wu & Zhao, Ju & Li, Chang-Wen, 2015. "Entry mode selection and its impact on an incumbent supply chain coordination," Journal of Retailing and Consumer Services, Elsevier, vol. 26(C), pages 1-13.
    2. Arya, Anil & Mittendorf, Brian, 2013. "Discretionary disclosure in the presence of dual distribution channels," Journal of Accounting and Economics, Elsevier, vol. 55(2), pages 168-182.
    3. Liu, Guanmei & Shao, Xiaofeng & Lang, Xiao, 2020. "On the interaction of technology upgrade and buyer entry in a supply chain," International Journal of Production Economics, Elsevier, vol. 221(C).
    4. Yenipazarli, Arda, 2021. "Downstream entry revisited: Economic effects of entry in vertically-related markets," Omega, Elsevier, vol. 103(C).
    5. Debasmita Basak & Arijit Mukherjee, 2021. "Competition, External Economies of Scale, and Unionized Wage," Journal of Industry, Competition and Trade, Springer, vol. 21(4), pages 585-592, December.
    6. Ioannis N. Pinopoulos, 2014. "A note on the effects of downstream free entry on wholesale pricing," Discussion Paper Series 2014_05, Department of Economics, University of Macedonia, revised Sep 2014.
    7. Liu, Guanmei & Wang, Haijun & Shao, Xiaofeng, 2023. "Technology investments into a supplier with upstream entry," European Journal of Operational Research, Elsevier, vol. 305(1), pages 240-259.
    8. Glock, Christoph H. & Kim, Taebok, 2015. "The effect of forward integration on a single-vendor–multi-retailer supply chain under retailer competition," International Journal of Production Economics, Elsevier, vol. 164(C), pages 179-192.
    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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