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Market expansion may harm the supplier in a bilateral monopoly

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  • Noriaki Matsushima
  • Laixun Zhao

Abstract

We consider a bilateral monopoly with a supplier and a buyer. Their trading terms are determined through negotiations, but affected by the buyer's efforts to search for outside suppliers. We find surprisingly that a market expansion may harm the supplier.

Suggested Citation

  • Noriaki Matsushima & Laixun Zhao, 2018. "Market expansion may harm the supplier in a bilateral monopoly," ISER Discussion Paper 1040, Institute of Social and Economic Research, Osaka University.
    • Handle: RePEc:dpr:wpaper:1040
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    File URL: https://www.iser.osaka-u.ac.jp/library/dp/2018/DP1040.pdf
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    References listed on IDEAS

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    1. Davidson, Carl, 1988. "Multiunit Bargaining in Oligopolistic Industries," Journal of Labor Economics, University of Chicago Press, vol. 6(3), pages 397-422, July.
    2. Milliou, Chrysovalantou & Petrakis, Emmanuel, 2007. "Upstream horizontal mergers, vertical contracts, and bargaining," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 963-987, October.
    3. Noriaki Matsushima & Laixun Zhao, 2018. "Technology spillovers and outside options in a bilateral duopoly," ISER Discussion Paper 1039, Institute of Social and Economic Research, Osaka University.
    4. Roman Inderst & Tommaso Valletti, 2009. "Price discrimination in input markets," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 1-19, March.
    5. Alberto Iozzi & Tommaso Valletti, 2014. "Vertical Bargaining and Countervailing Power," American Economic Journal: Microeconomics, American Economic Association, vol. 6(3), pages 106-135, August.
    6. Inderst, Roman, 2007. "Leveraging buyer power," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 908-924, October.
    7. Henrick Horn & Asher Wolinsky, 1988. "Bilateral Monopolies and Incentives for Merger," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 408-419, Autumn.
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    Cited by:

    1. Noriaki Matsushima & Laixun Zhao, 2018. "Technology spillovers and outside options in a bilateral duopoly," ISER Discussion Paper 1039, Institute of Social and Economic Research, Osaka University.

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