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
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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