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Illinois Walls in alternative market structures

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  • Schinkel, M.P.

    ()
    (Universiteit van Amsterdam)

  • Tuinstra, J.

    (Universiteit van Amsterdam)

Abstract

This note extends on our paper Illinois Walls: How barring indirect purchaser suits facilitates collusion (Schinkel, Tuinstra and Rüggeberg, 2005, henceforth STR). It presents analyses of two alternative, more competitive, market structures to conclude that when the conditions for existence of Illinois Walls derived in STR are satisfied, Illinois Walls also exist in these alternative market structures. Section 1 considers a market in which each downstream firm is able to buy and sell several varieties of the differentiated product, which increases competition at the downstream level. It is found that Illinois Walls then exist for discount factors higher than a certain critical discount factor, where this critical discount factor is strictly smaller than the critical discount value found in STR. Section 2 studies the case where all wholesalers produce one and the same homogeneous input, which the downstream firms each differentiate into their own variety. In this market structure, competition is strong at the upstream level. Illinois Walls turn out to exist for any positive value of the discount factor. These findings suggest that Illinois Walls are robust to variations in market structure.

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Bibliographic Info

Paper provided by Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance in its series CeNDEF Working Papers with number 05-11.

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Date of creation: 2005
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Handle: RePEc:ams:ndfwpp:05-11

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Postal: Dept. of Economics and Econometrics, Universiteit van Amsterdam, Roetersstraat 11, NL - 1018 WB Amsterdam, The Netherlands
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  1. Carl Davidson & Raymond Deneckere, 1986. "Long-Run Competition in Capacity, Short-Run Competition in Price, and the Cournot Model," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 404-415, Autumn.
  2. Rüggeberg, J. & Schinkel, M.P. & Tuinstra, J., 2005. "Illinois Walls: How barring indirect purchaser suits facilitates collusion," CeNDEF Working Papers, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance 05-10, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
  3. Richard E. Levitan & Martin Shubik, 1970. "Price Duopoly and Capacity Constraints," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 287, Cowles Foundation for Research in Economics, Yale University.
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