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Nonexclusionary input prices

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  • Soheil R. Nadimi
  • Dennis L. Weisman

Abstract

This article models a vertically integrated provider that is a monopoly supplier of an input that is essential for downstream production. An input price that is 'too high' can lead to inefficient foreclosure and one that is 'too low' creates incentives for nonprice discrimination. The range of nonexclusionary input prices is circumscribed by the input prices generated on the basis of upper-bound and lower-bound displacement ratios. The admissible range of the ratio of downstream to upstream price--cost margins is increasing in the degree of product differentiation and reduces to a single ratio in the limit as the products become perfectly homogeneous.

Suggested Citation

  • Soheil R. Nadimi & Dennis L. Weisman, 2014. "Nonexclusionary input prices," Applied Economics Letters, Taylor & Francis Journals, vol. 21(11), pages 727-732, July.
    • Handle: RePEc:taf:apeclt:v:21:y:2014:i:11:p:727-732
    DOI: 10.1080/13504851.2014.881961
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    References listed on IDEAS

    as
    1. Armstrong, Mark & Doyle, Chris & Vickers, John, 1996. "The Access Pricing Problem: A Synthesis," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 131-150, June.
    2. David Mandy & David Sappington, 2007. "Incentives for sabotage in vertically related industries," Journal of Regulatory Economics, Springer, vol. 31(3), pages 235-260, June.
    3. Sibley, David S. & Weisman, Dennis L., 1998. "Raising rivals' costs: The entry of an upstream monopolist into downstream markets," Information Economics and Policy, Elsevier, vol. 10(4), pages 451-470, December.
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