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Input Price Discrimination and Upstream R&D Investments

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  • Ioannis N. Pinopoulos

    (University of Macedonia)

Abstract

We study the welfare effects of input price discrimination when an upstream firm that supplies two cost-asymmetric downstream firms undertakes R&D investments. With observable two-part tariffs, banning discrimination always decreases R&D levels and long-run welfare. Under unobservable two-part tariffs, banning discrimination may increase or decrease R&D levels—depending on the degree of downstream cost-asymmetry; but it always decreases long-run welfare. Thus, with unobservable two-part tariffs, a ban on input price discrimination is detrimental to welfare even when its effect on upstream R&D investments is positive.

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  • Ioannis N. Pinopoulos, 2020. "Input Price Discrimination and Upstream R&D Investments," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(1), pages 85-106, August.
    • Handle: RePEc:kap:revind:v:57:y:2020:i:1:d:10.1007_s11151-019-09713-6
    DOI: 10.1007/s11151-019-09713-6
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    Cited by:

    1. Akio Kawasaki & Tomomichi Mizuno & Kazuhiro Takauchi, 2023. "Downstream new product development and upstream process innovation," Journal of Economics, Springer, vol. 140(3), pages 209-231, December.
    2. Zhong, Feimin & Zhou, Zhongbao & Leng, Mingming, 2021. "Negotiation-sequence, pricing, and ordering decisions in a three-echelon supply chain: A coopetitive-game analysis," European Journal of Operational Research, Elsevier, vol. 294(3), pages 1096-1107.
    3. Ioannis N. Pinopoulos, 2022. "Input Price Discrimination, Two‐Part Tariffs and Bargaining," Journal of Industrial Economics, Wiley Blackwell, vol. 70(4), pages 1058-1090, December.
    4. Wang, Xingtang, 2022. "Input price discrimination, pricing contract and social welfare," Mathematical Social Sciences, Elsevier, vol. 119(C), pages 91-96.
    5. Lømo, Teis Lunde, 2023. "Input price discrimination with two-part tariffs and quantity competition," Economics Letters, Elsevier, vol. 225(C).
    6. Kangsik Choi & DongJoon Lee & Seonyoung Lim, 2022. "A Note on Input Price Discrimination Under Bertrand Competition: Simultaneous vs. Sequential Contracting," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 61(2), pages 223-246, September.
    7. Toshiki Matsuoka, 2023. "Input price discrimination and strategic inventory," Manchester School, University of Manchester, vol. 91(2), pages 118-138, March.
    8. Chen, Fang-Yueh, 2023. "Trade warfare and sanctions in vertically related markets," Economic Modelling, Elsevier, vol. 121(C).
    9. Colombo, Stefano & Lambertini, Luca, 2023. "R&D investments with spillovers and endogenous horizontal differentiation," Regional Science and Urban Economics, Elsevier, vol. 98(C).

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    More about this item

    Keywords

    Input price discrimination; R&D investments; Vertical contracting; Welfare;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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