Equilibrium strategic overbuying
AbstractWe consider two firms competing both to sell their output and purchase their input from an upstream firm, to which they offer non-linear contracts. Firms may engage in strategic overbuying, purchasing more of the input when the supplier is capacity constrained than when it is not in order to exclude their competitor from the final market. Warehousing is a special case in which a downstream firm purchases more input than it uses and disposes of the rest. We show that both types of overbuying happen in equilibrium. The welfare analysis leads to ambiguous conclusions.
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Bibliographic InfoPaper provided by Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS in its series Economics Working Paper Archive (University of Rennes 1 & University of Caen) with number 201205.
Date of creation: Dec 2011
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Find related papers by JEL classification:
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-02-08 (All new papers)
- NEP-BEC-2012-02-08 (Business Economics)
- NEP-COM-2012-02-08 (Industrial Competition)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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