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(In)efficient trading forms in competing vertical chains

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Author Info

  • Emmanuel Petrakis

    () (Department of Economics, University of Crete, Greece)

  • Chrysovalantou Miliou

    (Department of Economics, Universidad Carlos III de Madrid, Calle Madrid 126, Getafe (Madrid))

  • Nikos Vettas

    () (Athens University of Economics and Business)

Abstract

We study competing vertical chains where upstream and downstream firms bargain over their form and terms of trading. Both (conditionally) inefficient wholesale price contracts and efficient contracts that take the form of price-quantity bundles (and not of two-tariffs) arise in equilibrium under different parameter configurations. Changes in bargaining power distribution affect market outcomes by altering the trading terms and, more importantly, the trading form. As a result, a firm might benefit by a reduction in its bargaining power and consumers could benefit from an increase in the downstream �countervailing power� or from a more uneven bargaining power distribution.

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Bibliographic Info

Paper provided by University of Crete, Department of Economics in its series Working Papers with number 0916.

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Length: 48 pages
Date of creation: 08 Dec 2009
Date of revision:
Handle: RePEc:crt:wpaper:0916

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Related research

Keywords: Vertical chains; strategic contracting; bargaining; two-part tariffs; price-quantity bundles; wholesale prices; vertical integration;

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Cited by:
  1. Daniel Müller & Fabian Herweg, 2009. "Price Discrimination in Input Markets: Downstream Entry and Welfare," Bonn Econ Discussion Papers bgse06_2010, University of Bonn, Germany.
  2. Roman Inderst & Tommaso Valletti, 2009. "Price discrimination in input markets," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 1-19.
  3. Roman Inderst & Christian Wey, 2005. "Buyer Power and Supplier Incentives," Discussion Papers of DIW Berlin 464, DIW Berlin, German Institute for Economic Research.
  4. Milliou, Chrysovalantou & Petrakis, Emmanuel, . "Upstream horizontal mergers, bargaining, vertical contracts," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/336, Universidad Carlos III de Madrid.
  5. Barros, Pedro Pita & Brito, Duarte & de Lucena, Diogo, 2006. "Mergers in the food retailing sector: An empirical investigation," European Economic Review, Elsevier, vol. 50(2), pages 447-468, February.
  6. Normann, Hans-Theo, 2009. "Vertical integration, raising rivals' costs and upstream collusion," European Economic Review, Elsevier, vol. 53(4), pages 461-480, May.
  7. Chrysovalantou Milliou & Apostolis Pavlou, 2009. "Upstream Horizontal Mergers and Efficiency Gains," CESifo Working Paper Series 2748, CESifo Group Munich.
  8. 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.
  9. Inderst, Roman, 2007. "Leveraging buyer power," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 908-924, October.
  10. Chrysovalantou Miliou & Emmanuel Petrakis, 2005. "Upstream Horizontal Mergers, Bargaining and Vertical Contracts," Working Papers 0509, University of Crete, Department of Economics.
  11. Roman Inderst & Tommaso M. Valletti, 2011. "Buyer Power And The ‘Waterbed Effect’," Journal of Industrial Economics, Wiley Blackwell, vol. 59(1), pages 1-20, 03.

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