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Product Differentiation in Successive Vertical Oligopolies

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Author Info
Paul Belleflamme (Queen Mary, University of London)
Eric Toulemonde (University of Namur)

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Abstract

This 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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Publisher Info
Paper provided by Queen Mary, University of London, Department of Economics in its series Working Papers with number 421.

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Date of creation: Oct 2000
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Handle: RePEc:qmw:qmwecw:wp421

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Related research
Keywords: Product differentiation Vertical relationships Oligopoly

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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

Cited by:
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  1. José Pontes, 2007. "Networks and firm location," The Annals of Regional Science, Springer, vol. 41(4), pages 897-909, December. [Downloadable!] (restricted)
    Other versions:
    • José Pedro Pontes, 2006. "Networks and Firm Location," Working Papers 2006/09, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
  2. José Pedro Pontes, 2004. "Agglomeration in a Vertically-linked Oligopoly," Working Papers 2004/06, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
  3. Nisvan Erkal, 2003. "Buyer-Supplier Interaction, Asset Specificity, And Product Choice," Department of Economics - Working Papers Series 885, The University of Melbourne. [Downloadable!]
    Other versions:
  4. Arijit Mukherjee2 & Piercarlo Zanchettin, 2007. "Vertical integration and product innovation," Discussion Papers in Economics 07/12, Department of Economics, University of Leicester. [Downloadable!]
  5. André Rocha & José Pedro Pontes, 2005. "Spatial Cournot Oligopoly with Vertical Linkages," Working Papers 2005/11, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
  6. Jose Pedro Pontes, 2005. "Input Specificity and Location," Working Papers 2005/01, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
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