Product Differentiation in Successive Vertical Oligopolies
AbstractThis is a successive oligopoly model with two brands. Each downstream firm chooses one brand to sell on a final market. The upstream firms specialize in the production of one input specifically designed for the production of one brand, but they also produce the input for the other brand at an extra cost. We show that when more downstream firms choose one brand, more upstream firms will specialize in the input specific to that brand, and vice versa. Hence, multiple equilibria are possible and the softening effect of brand differentiation on competition might not be strong enough to induce maximal differentiation. The existence of equilibria and their welfare performance are also examined.
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Bibliographic InfoPaper provided by Queen Mary, University of London, School of Economics and Finance in its series Working Papers with number 421.
Date of creation: Oct 2000
Date of revision:
Product differentiation; Vertical relationships; Oligopoly;
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
- L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
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