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A Model of Vertical Oligopolistic Competition

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  • Reisinger, Markus
  • Schnitzer, Monika

Abstract

This paper develops a model of successive oligopolies with endogenous market entry, allowing for varying degrees of product differentiation and entry costs in both markets. Our analysis shows that the downstream conditions dominate the overall profitability of the two-tier structure while the upstream conditions mainly affect the distribution of profits. We compare the welfare effects of upstream versus downstream deregulation policies and show that the impact of deregulation may be overvalued when ignoring feedback effects from the other market. Furthermore, we analyze how different forms of vertical restraints influence the endogenous market structure and show when they are welfare enhancing.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6730.

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Date of creation: Feb 2008
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Handle: RePEc:cpr:ceprdp:6730

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Related research

Keywords: Deregulation; Free Entry; Price Competition; Product Differentiation; Successive Oligopolies; Two-Part Tariffs; Vertical Restraints;

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  17. Leslie M. Marx & Greg Shaffer, 2004. "Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity: Comment," American Economic Review, American Economic Association, vol. 94(3), pages 796-801, June.
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  27. Dobson, Paul W. & Waterson, Michael, 2007. "The competition effects of industry-wide vertical price fixing in bilateral oligopoly," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 935-962, October.
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Cited by:
  1. Dewenter, Ralf & Haucap, Justus & Wenzel, Tobias, 2009. "Indirect network effects with two Salop circles: the example of the music industry," Ilmenau Economics Discussion Papers 63, Ilmenau University of Technology, Institute of Economics.

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