Downstream Mode of Competition With Upstream Market Power
AbstractIn contrast with previous studies we assume no ex-ante commitment over the ÃƒÂ¢Ã¯Â¿Â½Ã¯Â¿Â½price or quantityÃƒÂ¢Ã¯Â¿Â½Ã¯Â¿Â½ type of contract which downstream firms will independently offer consumers in a two-tier oligopoly. Under competing vertical chains, we propose that the downstream mode of competition which in equilibrium emerges is the outcome of independent implicit agreements, between each downstream firm and its exclusive input supplier, in each vertical chain. Our findings suggest that input suppliers may thus act as commitment devices sufficient to endogenously sustain the quantity (Cournot) mode of competition.
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Bibliographic InfoPaper provided by University of Crete, Department of Economics in its series Working Papers with number 1003.
Date of creation: 17 Mar 2010
Date of revision:
Oligopoly; Vertical relations; Wholesale prices; Equilibrium mode of competition;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-28 (All new papers)
- NEP-COM-2010-03-28 (Industrial Competition)
- NEP-IND-2010-03-28 (Industrial Organization)
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