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Downstream Competition, Bargaining and Welfare

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  • George Symeonidis

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Abstract

I analyse the effects of downstream competition when there is bargaining between downstream firms and upstream agents (firms or unions). When bargaining is over a uniform input price, a decrease in the intensity of competition (or a merger) between downstream firms may raise consumer surplus and overall welfare. When bargaining is over a two-part tariff, a decrease in the intensity of competition reduces downstream profits and upstream utility and raises consumer surplus and overall welfare. In both cases, standard welfare results of oligopoly theory can be reversed: less competition can be unprofitable for firms and/or beneficial for consumers and society as a whole.

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Bibliographic Info

Paper provided by University of Essex, Department of Economics in its series Economics Discussion Papers with number 625.

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Date of creation: 02 Mar 2007
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Handle: RePEc:esx:essedp:625

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  6. Zhiqi Chen, 2001. "Dominant Retailers and the Countervailing Power Hypothesis," Carleton Economic Papers 01-05, Carleton University, Department of Economics, revised 2003.
  7. Inderst, Roman & Wey, Christian, 2001. "Bargaining, Mergers and Technology Choice in Bilaterally Oligopolistic Industries," CEPR Discussion Papers 2981, C.E.P.R. Discussion Papers.
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  12. Bergès-Sennou, F. & Caprice, S., 2004. "Is competition or collusion in the product market relevant for labour markets ?," Economics Working Paper Archive (Toulouse) 200412, French Institute for Agronomy Research (INRA), Economics Laboratory in Toulouse (ESR Toulouse).
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  14. Roman Inderst & Christian Wey, 2005. "Buyer Power and Supplier Incentives," Discussion Papers of DIW Berlin 464, DIW Berlin, German Institute for Economic Research.
  15. Fershtman, C. & Gandal, N., 1991. "Disadvantageous Semicollusion," Papers 37-91, Tel Aviv.
  16. Symeonidis, George, 2002. "Cartel stability with multiproduct firms," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 339-352, March.
  17. Chen, Zhiqi & Ross, Thomas W., 2003. "Cooperating upstream while competing downstream: a theory of input joint ventures," International Journal of Industrial Organization, Elsevier, vol. 21(3), pages 381-397, March.
  18. Dobson, Paul W & Waterson, Michael, 1997. "Countervailing Power and Consumer Prices," Economic Journal, Royal Economic Society, vol. 107(441), pages 418-30, March.
  19. Lommerud, Kjell Erik & Sørgard, Lars & Straume, Odd Rune, 2003. "National versus International Mergers in Unionised Oligopoly," CEPR Discussion Papers 4040, C.E.P.R. Discussion Papers.
  20. Naylor, Robin A., 2002. "Industry profits and competition under bilateral oligopoly," Economics Letters, Elsevier, vol. 77(2), pages 169-175, October.
  21. Dowrick, Steve, 1989. "Union-Oligopoly Bargaining," Economic Journal, Royal Economic Society, vol. 99(398), pages 1123-42, December.
  22. Chaim Fershtman & Kenneth L Judd, 1984. "Equilibrium Incentives in Oligopoly," Discussion Papers 642, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  23. George Symeonidis, 2007. "The Effect of Competition on Wages and Productivity: Evidence from the UK," Economics Discussion Papers 626, University of Essex, Department of Economics.
  24. Dhillon, Amrita & Petrakis, Emmanuel, 2002. "A generalised wage rigidity result," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 285-311, March.
  25. Lopez, Monica Correa & Naylor, Robin A., 2004. "The Cournot-Bertrand profit differential: A reversal result in a differentiated duopoly with wage bargaining," European Economic Review, Elsevier, vol. 48(3), pages 681-696, June.
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Cited by:
  1. Chrysovalantou Milliou & Joel Sandonis, 2014. "Manufacturers Mergers and Product Variety in Vertically Related Markets," CESifo Working Paper Series 4932, CESifo Group Munich.
  2. Chrysovalantou Milliou & Apostolis Pavlou, 2009. "Upstream Horizontal Mergers and Efficiency Gains," CESifo Working Paper Series 2748, CESifo Group Munich.
  3. Alberto Iozzi & Tommaso Valletti, 2010. "Vertical bargaining and countervailing power," CEIS Research Paper 160, Tor Vergata University, CEIS, revised 28 May 2010.
  4. Arijit Mukherjee, 2010. "Product Market Cooperation, Profits and Welfare in the Presence of Labor Union," Journal of Industry, Competition and Trade, Springer, vol. 10(2), pages 151-160, June.
  5. George Symeonidis, 2009. "Downstream merger and welfare in a bilateral oligopoly," Economics Discussion Papers 671, University of Essex, Department of Economics.
  6. Kesavayuth, Dusanee & Zikos, Vasileios, 2012. "Upstream and downstream horizontal R&D networks," Economic Modelling, Elsevier, vol. 29(3), pages 742-750.
  7. Toshihiro Matsumura & Noriaki Matsushima & Susumu Cato, 2009. "Relative Performance and R&D Competition," ISER Discussion Paper 0752, Institute of Social and Economic Research, Osaka University.

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