Cournot is more competitive than Bertrand! Upstream Monopoly with Two-part Tariffs
AbstractThe present paper compares the Cournot and Bertrand equilibrium outcomes and social welfare in vertically related markets with upstream monopolistic market structure, where the trade between the upstream monopolist and the downstream firms is conducted via two-part tariffs contracts. We show that the equilibrium quantities, the profits of the downstream firms, the consumers' surplus and the social welfare are always higher under Cournot final market competition than under Bertrand final market competition. On the contrary the equilibrium profits of the upstream monopolist under Bertrand market competition always exceed those obtained under Cournot market competition.
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Bibliographic InfoPaper provided by University of Crete, Department of Economics in its series Working Papers with number 1305.
Length: 21 pages
Date of creation: 29 Aug 2012
Date of revision: 08 May 2013
Vertical relations; Betrand; Cournot; Two-part tariffs;
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-05-22 (All new papers)
- NEP-BEC-2013-05-22 (Business Economics)
- NEP-COM-2013-05-22 (Industrial Competition)
- NEP-IND-2013-05-22 (Industrial Organization)
- NEP-MIC-2013-05-22 (Microeconomics)
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