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A Model of Vertical Oligopolistic Competition

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Author Info
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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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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Related research
Keywords: Deregulation Free Entry Price Competition Product Differentiation Successive Oligopolies Two-Part Tariffs Vertical Restraints

Find related papers by JEL classification:
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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  11. Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1181-1222, December.
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  12. 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. [Downloadable!] (restricted)
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  14. Ordover, Janusz A & Panzar, John C, 1982. "On the Nonlinear Pricing of Inputs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(3), pages 659-75, October. [Downloadable!] (restricted)
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