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Symbiotic Production and Downstream Market Competition

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  • Wen-Chung Guo

    ()

  • Fu-Chuan Lai

    ()

  • Chorng-Jian Liu

    ()

  • Chao-Cheng Mai

    ()

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    Abstract

    It is well known that the double marginalization problem in the vertical relation can be eliminated by collusion, but it is undesirable because of the monopoly pricing outcome. This study addresses the role of downstream market competition under symbiotic production and demonstrates that incorporating different types of competition in product markets will partially eliminate inefficiency caused by double marginalization. It suggests that introducing callback services or internet telephones creates an environment similar to downward market competition in the output market; hence, it is observed that international tariffs are significantly reduced. Copyright International Atlantic Economic Society 2012

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    File URL: http://hdl.handle.net/10.1007/s11293-012-9322-6
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    Bibliographic Info

    Article provided by International Atlantic Economic Society in its journal Atlantic Economic Journal.

    Volume (Year): 40 (2012)
    Issue (Month): 3 (September)
    Pages: 329-340

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    Handle: RePEc:kap:atlecj:v:40:y:2012:i:3:p:329-340

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    Related research

    Keywords: Symbiotic production; Double marginalization; Downstream market competition; L11; L13; L22;

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    1. Irmen, Andreas, 1997. "Mark-up pricing and bilateral monopoly," Economics Letters, Elsevier, vol. 54(2), pages 179-184, February.
    2. Nicholas Economides, 1994. "Quality Choice and Vertical Integration," Working Papers 94-22, New York University, Leonard N. Stern School of Business, Department of Economics.
    3. Chorng-Jian Liu & Chao-Cheng Mai & Fu-Chuan Lai & Wen-Chung Guo, 2010. "Pollution, Factor Ownerships, and Emission Taxes," Atlantic Economic Journal, International Atlantic Economic Society, vol. 38(2), pages 209-216, June.
    4. Young, Allan Richard, 1991. "Vertical Structure and Nash Equilibrium: A Note," Journal of Industrial Economics, Wiley Blackwell, vol. 39(6), pages 717-22, December.
    5. Lam, Pun-Lee, 1997. "Erosion of monopoly power by call-back. Lessons from Hong Kong," Telecommunications Policy, Elsevier, vol. 21(8), pages 693-695, October.
    6. Economides, Nicholas & Salop, Steven C, 1992. "Competition and Integration among Complements, and Network Market Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 105-23, March.
    7. Brueckner, Jan K., 2002. "Network Structure and Airline Scheduling," Working Papers 02-0112, University of Illinois at Urbana-Champaign, College of Business.
    8. Greenhut, M L & Ohta, H, 1979. "Vertical Integration of Successive Oligopolists," American Economic Review, American Economic Association, vol. 69(1), pages 137-41, March.
    9. Ingo Vogelsang, 2003. "Price Regulation of Access to Telecommunications Networks," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 830-862, September.
    10. Wright, Julian, 2002. "Access Pricing under Competition: An Application to Cellular Networks," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 289-315, September.
    11. Brueckner, Jan K., 2001. "The economics of international codesharing: an analysis of airline alliances," International Journal of Industrial Organization, Elsevier, vol. 19(10), pages 1475-1498, December.
    12. Sandbach, Jonathan, 1996. "International telephone traffic, callback and policy implications," Telecommunications Policy, Elsevier, vol. 20(7), pages 507-515, August.
    13. Blair, Roger D & Kaserman, David L, 1987. "A Note on Bilateral Monopoly and Formula Price Contracts," American Economic Review, American Economic Association, vol. 77(3), pages 460-63, June.
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