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A Model of Vertical Oligopolistic Competition

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  • Reisinger, Markus
  • Schnitzer, Monika

Abstract

This paper develops a model of successive oligopolies with endogenous market entry, allowing for varying degrees of product differentiation and entry costs in both markets. Our analysis shows that the downstream conditions dominate the overall profitability of the two-tier structure while the upstream conditions mainly affect the distribution of profits. We compare the welfare effects of upstream versus downstream deregulation policies and show that the impact of deregulation may be overvalued when ignoring feedback effects from the other market. Furthermore, we analyze how different forms of vertical restraints influence the endogenous market structure and show when they are welfare enhancing.

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File URL: http://epub.ub.uni-muenchen.de/3189/1/Reisinger_Schnitzer_Munich_Discussion_Papers.pdf
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Bibliographic Info

Paper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 3189.

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Date of creation: 09 Apr 2008
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Handle: RePEc:lmu:muenec:3189

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Keywords: Deregulation; Free Entry; Price Competition; Product Differentiation; Successive Oligopolies; Two-Part Tariffs; Vertical Restraints;

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References

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  1. Manel Antelo & Lluís Bru, 2006. "The Welfare Effects Of Upstream Mergers In The Presence Of Downstream Entry Barriers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(4), pages 1269-1294, November.
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  3. Rey, Patrick & Tirole, Jean, 2003. "A Primer on Foreclosure," IDEI Working Papers 203, Institut d'Économie Industrielle (IDEI), Toulouse, revised Nov 2005.
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  6. Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects Of Regulation And Deregulation In Goods And Labor Markets," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 879-907, August.
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  22. 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.
  23. Hart, O. & Tirole, J., 1990. "Vertical Integration And Market Foreclosure," Working papers 548, Massachusetts Institute of Technology (MIT), Department of Economics.
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  27. Patrick Rey & Thibaud Verge, 2002. "Resale Price Maintenance and Horizontal Cartel," The Centre for Market and Public Organisation 02/047, Department of Economics, University of Bristol, UK.
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Cited by:
  1. Dewenter, Ralf & Haucap, Justus & Wenzel, Tobias, 2009. "Indirect network effects with two Salop circles: the example of the music industry," Ilmenau Economics Discussion Papers 63, Ilmenau University of Technology, Institute of Economics.

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