Bilateral monopolies and location choice
AbstractWe analyse how equilibrium locations in location-price games Ã la Hotelling are affected when firms acquire inputs through bilateral monopoly relations with suppliers. Assuming a duopoly downstream market, we consider the case of two independent input suppliers bargaining with both downstream firms. We find that the presence of input suppliers changes the locational incentives of downstream firms in several ways, compared with the case of exogenous production costs. Bargaining induces downstream firms to locate further apart, despite the fact that input prices increase with the distance between the firms. In the case of asymmetrical bargaining strengths, the downstream firm facing the stronger input supplier has a strategic advantage and locates closer to the market centre. Sequential location introduces a first-mover advantage which may be mitigated or reinforced, depending on whether or not it is the first mover that bargains with the stronger input supplier.
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Bibliographic InfoArticle provided by Elsevier in its journal Regional Science and Urban Economics.
Volume (Year): 34 (2004)
Issue (Month): 3 (May)
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Web page: http://www.elsevier.com/locate/regec
Other versions of this item:
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Production Analysis, and Firm Location - - - General
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