Vertically Related Markets and Trade Policy in a Bargaining Framework
AbstractWe analyse the interaction of asymmetric industries in international vertically related markets. Each downstream firm bargains efficiently with its domestic supplier in a first stage and with the foreign supplier in a second stage. The asymmetry in upstream costs leads to inter-industry trade. It can also cause vertical integration in the more efficient industry, and possibly vertical foreclosure. The latter occurs if competition in the final goods market is severe (the goods are close substitutes). When the more efficient industry is integrated, a tariff on imports of the final good stimulates inter-industry trade of the input, but it may increase or decrease the market share of the domestic upstream firm. The effects of a tariff depend on the industry configuration in the low-cost country.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1175.
Date of creation: May 1995
Date of revision:
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Other versions of this item:
- Karp, Larry & Sioli, Lucy, 1995. "Vertically Related Markets and Trade Policy in a Bargaining Framework," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt6hk9b0jt, Department of Agricultural & Resource Economics, UC Berkeley.
- C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
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