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This paper reverses the standard order between input supply negotiations and downstream competition and assumes that competition for orders takes place prior to procurement of inputs in a vertical chain. It is found that oligopolistically competitive outcomes will result despite the presence of an upstream monopolist. Here, vertical integration is a means by which the monopolist can leverage its market power downstream to the detriment of consumers. However, it does so, not by foreclosing on independent downstream firms, but by softening the competitive behaviour of its own integrated units. Copyright 2007 Blackwell Publishing Ltd..

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  • Joshua S. Gans, 2007. "VERTICAL CONTRACTING WHEN COMPETITION FOR ORDERS PRECEDES PROCUREMENT -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 55(2), pages 325-346, June.
  • Handle: RePEc:bla:jindec:v:55:y:2007:i:2:p:325-346

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    References listed on IDEAS

    1. Schmalensee, Richard, 2002. "Payment Systems and Interchange Fees," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 103-122, June.
    2. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International, vol. 10.
    3. Wright, Julian, 2003. "Optimal card payment systems," European Economic Review, Elsevier, vol. 47(4), pages 587-612, August.
    4. Baxter, William F, 1983. "Bank Interchange of Transactional Paper: Legal and Economic Perspectives," Journal of Law and Economics, University of Chicago Press, vol. 26(3), pages 541-588, October.
    5. Caillaud, Bernard & Jullien, Bruno, 2003. " Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-328, Summer.
    6. Hausman, Jerry A & Leonard, Gregory K & Tirole, Jean, 2003. " On Nonexclusive Membership in Competing Joint Ventures," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 43-62, Spring.
    7. Wright, Julian, 2003. "Pricing in debit and credit card schemes," Economics Letters, Elsevier, vol. 80(3), pages 305-309, September.
    8. Weiner Stuart E. & Wright Julian, 2005. "Interchange Fees in Various Countries: Developments and Determinants," Review of Network Economics, De Gruyter, vol. 4(4), pages 1-34, December.
    9. Julian Wright, 2004. "The Determinants of Optimal Interchange Fees in Payment Systems," Journal of Industrial Economics, Wiley Blackwell, vol. 52(1), pages 1-26, March.
    10. Caillaud, Bernard & Jullien, Bruno, 2001. "Competing cybermediaries," European Economic Review, Elsevier, vol. 45(4-6), pages 797-808, May.
    11. Schiff, Aaron, 2003. "Open and closed systems of two-sided networks," Information Economics and Policy, Elsevier, vol. 15(4), pages 425-442, December.
    12. Joshua S. Gans & Stephen P. King, 2003. "A Theoretical Analysis of Credit Card Reform in Australia," The Economic Record, The Economic Society of Australia, vol. 79(247), pages 462-472, December.
    13. Gans Joshua S & King Stephen P, 2003. "The Neutrality of Interchange Fees in Payment Systems," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-18, January.
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    Cited by:

    1. Rey, Patrick & Verge, T., 2016. "Secret contracting in multilateral relations," TSE Working Papers 16-744, Toulouse School of Economics (TSE), revised Jul 2017.
    2. João Montez, 2015. "Controlling opportunism in vertical contracting when production precedes sales," RAND Journal of Economics, RAND Corporation, vol. 46(3), pages 650-670, September.
    3. Patrick Rey & Thibaud Vergé, 2017. "Secret contracting in multilateral relations," Working Papers 2017-44, Center for Research in Economics and Statistics.
    4. Joshua S. Gans, 2007. "Concentration-Based Merger Tests and Vertical Market Structure," Journal of Law and Economics, University of Chicago Press, vol. 50, pages 661-681.
    5. Sarah Parlane & Ying-Yi Tsai, 2013. "Optimal Contract Orders and Relationship-Specific Investments in Vertical Organizations," Working Papers 201316, School of Economics, University College Dublin.
    6. Richard Meade & Seini O’Connor, 2011. "Comparison of Long-term Contracts and Vertical Integration in Decentralized Electricity Markets," Chapters,in: Competition, Contracts and Electricity Markets, chapter 4 Edward Elgar Publishing.

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