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Price Versus Quantity Competition in a Vertically Related Market with Retailer’s Effort

Author

Listed:
  • Liu Qian

    (International Service Economic Research Institute, Guangdong University of Foreign Studies, Guangzhou, P.R. China)

  • Wang Leonard F. S.

    (Wenlan School of Business, Zhongnan University of Economics and Law, Wuhan, China)

Abstract

Allowing downstream retailers to engage in demand-enhancing investment, this paper demonstrates that the classical conclusions regarding the comparison of Cournot and Bertrand competition in a vertically related market with decentralized bargaining are completely reversed. It shows that Bertrand competition is more efficient than Cournot competition, in the sense that both consumer surplus and social welfare are always higher in the former.

Suggested Citation

  • Liu Qian & Wang Leonard F. S., 2022. "Price Versus Quantity Competition in a Vertically Related Market with Retailer’s Effort," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 22(1), pages 51-66, January.
    • Handle: RePEc:bpj:bejtec:v:22:y:2022:i:1:p:51-66:n:13
    DOI: 10.1515/bejte-2020-0036
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    More about this item

    Keywords

    Cournot; Bertrand; vertically-related market; decentralized bargaining; promotional effort; D43; L13; L14;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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