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A Model of Vertical Oligopolistic Competition

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Author Info
Markus Reisinger () (Department of Economics, University of Munich, Kaulbachstr. 45, 80539 Munich, Germany, e-mail: markus.reisinger@lrz.uni-muenchen.de.)
Monika Schnitzer () (Department of Economics, University of Munich, Akademiestr. 1/III, 80799 Munich, Germany, e-mail: schnitzer@lrz.uni-muenchen.de)

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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 proï¬tability of the two-tier structure while the upstream conditions mainly affect the distribution of proï¬ts. 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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Publisher Info
Paper provided by SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Papers with number 228.

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Date of creation: Feb 2008
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Handle: RePEc:trf:wpaper:228

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

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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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References listed on IDEAS
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  2. Sofia Berto Villas-Boas, 2007. "Vertical Relationships between Manufacturers and Retailers: Inference with Limited Data," Review of Economic Studies, Blackwell Publishing, vol. 74(2), pages 625-652, 04. [Downloadable!] (restricted)
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  14. 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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  16. Salinger, Michael A, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, MIT Press, vol. 103(2), pages 345-56, May. [Downloadable!] (restricted)
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