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Incentive to encourage downstream competition under bilateral oligopoly


  • Stephane Caprice

    () (INRA-ESR Toulouse and University of Warwick)


Consider the contracting problem of an input supplier dealing with several firms that compete in an output market. We show that, contrary to the key result of the previous literature, an input supplier's profit can increase with the number of downstream firms if the upstream firm is not a monopolist but instead competes with an alternative inferior supplier.

Suggested Citation

  • Stephane Caprice, 2005. "Incentive to encourage downstream competition under bilateral oligopoly," Economics Bulletin, AccessEcon, vol. 12(9), pages 1-5.
  • Handle: RePEc:ebl:ecbull:eb-05l00001

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    References listed on IDEAS

    1. repec:dau:papers:123456789/6313 is not listed on IDEAS
    2. McAfee, R. Preston & Schwartz, Marius, 1995. "The non-existence of pairwise-proof equilibrium," Economics Letters, Elsevier, vol. 49(3), pages 251-259, September.
    3. Chemla, G., 1999. "Downstream Competition, Foreclosure, and Vertical Integration," Papers 99-18, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
    4. Gilles Chemla, 2003. "Downstream Competition, Foreclosure, and Vertical Integration," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(2), pages 261-289, June.
    5. McAfee, R Preston & Schwartz, Marius, 1994. "Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity," American Economic Review, American Economic Association, vol. 84(1), pages 210-230, March.
    6. Ilya Segal & Michael D. Whinston, 2003. "Robust Predictions for Bilateral Contracting with Externalities," Econometrica, Econometric Society, vol. 71(3), pages 757-791, May.
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    Cited by:

    1. Ramon Fauli-Oller & Lluis Bru, 2008. "Horizontal mergers for buyer power," Economics Bulletin, AccessEcon, vol. 12(3), pages 1-7.
    2. Ramon Fauli-Oller & Joel Sandonis, 2016. "Welfare Effects Of Downstream Mergers And Upstream Market Concentration," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 61(05), pages 1-16, December.
    3. Yamada, Mai, 2016. "The Optimal Trading Partner for an Upstream Monopolist," MPRA Paper 70325, University Library of Munich, Germany.
    4. Joel Sandonís Díez & Javier M. López Cuñat, 2015. "Upstream incentives to encourage downstream competition in a vertically separated industry," Working Papers. Serie AD 2015-04, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).

    More about this item


    bilateral oligopoly;

    JEL classification:

    • L0 - Industrial Organization - - General
    • L4 - Industrial Organization - - Antitrust Issues and Policies


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