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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Paper provided by Queen Mary, University of London, Department of Economics in its series Working Papers with number
421.
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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José Pedro Pontes, 2006.
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Jose Pedro Pontes, 2005.
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