Input pricing by an upstream monopolist into imperfectly competitive downstream markets
AbstractIn downstream markets where entry is independent from profitability conditions, the upstream supplier’s optimal pricing policy is invariant with respect to downstream market structure. This price invariant result, however, is reversed when there is free entry in downstream market. When entry is endogenously dependent on profitability conditions, the upstream supplier’s price-setting behavior depends on the number of operative firms in the final good market. We show that the upstream supplier charges a higher input price under a free entry situation in downstream market than under a no-entry condition. We also show that a higher input price is set under Bertrand competition than under Cournot competition in a downstream market with free entry.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics, University of Macedonia in its series Discussion Paper Series with number 2009_14.
Date of creation: Oct 2009
Date of revision: Oct 2009
Contact details of provider:
Web page: http://www.uom.gr/index.php?tmima=3
Vertical relationship; Pricing; Competition; Oligopoly; Free entry.;
Find related papers by JEL classification:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-24 (All new papers)
- NEP-COM-2009-10-24 (Industrial Competition)
- NEP-IND-2009-10-24 (Industrial Organization)
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Theodore Panagiotidis).
If references are entirely missing, you can add them using this form.