Successive Oligopolies and Decreasing Returns
In this paper, we analyze successive oligopolies where downstream firms share the same decreasing returns technology of the Cobb-Douglas type. We stress the differences between the conclusions obtained under this assumption and those resulting from the traditional literature in which output firms use a constant returns technology. It is shown that when firms use a decreasing returns technology, (i) the profit of a downstream firm can decrease when the upstream market is more competitive; (ii) the input price does not tend to the corresponding marginal cost when the number of firms in both markets tends to infinite; and (iii) double marginalization is lower. Finally, the effects of mergers are revisited to highlight the role played by the technology of output firms.
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Volume (Year): 10 (2010)
Issue (Month): 1 (November)
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References listed on IDEAS
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- Jean J. Gabszewicz & Skerdilajda Zanaj, 2011.
"Free entry in successive oligopolies,"
International Journal of Economic Theory,
The International Society for Economic Theory, vol. 7(2), pages 179-188, June.
- GABSZEWICZ, Jean J. & ZANAJ, Skerdilajda, "undated". "Free entry in successive oligopolies," CORE Discussion Papers RP 2307, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Riordan, Michael H, 1998. "Anticompetitive Vertical Integration by a Dominant Firm," American Economic Review, American Economic Association, vol. 88(5), pages 1232-1248, December.
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- Riordan, M.H., 1996. "Anticompetitive Vertical Integration by a Dominant Firm," Papers 64, Boston University - Industry Studies Programme.
- Hansen, Terje & Jaskold-Gabszewicz, Jean, 1972. "Collusion of factor owners and distribution of social output," Journal of Economic Theory, Elsevier, vol. 4(1), pages 1-18, February.
- HANSEN, Terje & JASKOLD GABSZEWICZ, Jean, "undated". "Collusion of factor owners and distribution of social output," CORE Discussion Papers RP 101, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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