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Quantity versus price competitions in a vertical relationship with separate downstream markets

Author

Listed:
  • Aika Monden

    (Kyoto University)

  • Shuhei Takezawa

    (Osaka University)

  • Tomomichi Mizuno

    (Kobe University)

Abstract

Contrary to conventional wisdom, our analysis of vertical relationships involving two independent downstream markets challenges the notion that Bertrand competition yields lower profits than Cournot competition. We show that if one downstream market in which two firms compete on either quantity or price is smaller than the other downstream market, then the input price under Bertrand competition is lower than under Cournot competition. This can lead to higher profits for downstream firms under Bertrand competition.

Suggested Citation

  • Aika Monden & Shuhei Takezawa & Tomomichi Mizuno, 2025. "Quantity versus price competitions in a vertical relationship with separate downstream markets," Economics Bulletin, AccessEcon, vol. 45(3), pages 1620-1629.
    • Handle: RePEc:ebl:ecbull:eb-24-00513
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    References listed on IDEAS

    as
    1. Manasakis, Constantine & Vlassis, Minas, 2014. "Downstream mode of competition with upstream market power," Research in Economics, Elsevier, vol. 68(1), pages 84-93.
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    6. Alipranti, Maria & Milliou, Chrysovalantou & Petrakis, Emmanuel, 2014. "Price vs. quantity competition in a vertically related market," Economics Letters, Elsevier, vol. 124(1), pages 122-126.
    7. Luciano Fanti & Nicola Meccheri, 2011. "The Cournot-Bertrand profit differential in a differentiated duopoly with unions and labour decreasing returns," Economics Bulletin, AccessEcon, vol. 31(1), pages 233-244.
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    Keywords

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    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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