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First-mover advantage reversals under passive cross forward ownership in vertically related markets

Author

Listed:
  • Emmanuel Petrakis

    (University of Crete)

  • Panagiotis Skartados

    (University of Crete)

Abstract

We consider a two-tier industry with an upstream monopolist trading, via interim observable linear tariff contracts, with two differentiated goods downstream Stackelberg competitors. The upstream monopolist owns a symmetric minority share on both downstream customers, i.e., there is passive cross forward ownership (PCFO). We show that PCFO may reverse the well-known first-mover advantage of the Stackelberg game. PCFO is also pro-competitive and welfare enhancing.

Suggested Citation

  • Emmanuel Petrakis & Panagiotis Skartados, 2022. "First-mover advantage reversals under passive cross forward ownership in vertically related markets," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 10(2), pages 303-311, October.
    • Handle: RePEc:spr:etbull:v:10:y:2022:i:2:d:10.1007_s40505-022-00235-1
    DOI: 10.1007/s40505-022-00235-1
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    More about this item

    Keywords

    Passive cross forward ownership; Vertical relations; Linear tariffs; Interim observable contracts; Stackelberg competition; First mover advantage;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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