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Cournot vs. Bertrand under centralised bargaining

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  • Basak, Debasmita

Abstract

We revisit the debate on Cournot and Bertrand profit comparison in a vertically related upstream market for inputs. We find that when an input pricing contract is determined through centralised bargaining, the final goods producers earn higher (lower) profit under quantity competition than under price competition if the goods are substitutes (complements). Our results are strikingly different to the ones obtained from a similar comparison in other vertical pricing models.

Suggested Citation

  • Basak, Debasmita, 2017. "Cournot vs. Bertrand under centralised bargaining," Economics Letters, Elsevier, vol. 154(C), pages 124-127.
    • Handle: RePEc:eee:ecolet:v:154:y:2017:i:c:p:124-127
    DOI: 10.1016/j.econlet.2017.02.031
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    References listed on IDEAS

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    6. Arijit Mukherjee & Udo Broll & Soma Mukherjee, 2012. "Bertrand Versus Cournot Competition In A Vertical Structure: A Note," Manchester School, University of Manchester, vol. 80(5), pages 545-559, September.
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    9. 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.
    10. Basak, Debasmita & Wang, Leonard F.S., 2016. "Endogenous choice of price or quantity contract and the implications of two-part-tariff in a vertical structure," Economics Letters, Elsevier, vol. 138(C), pages 53-56.
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    Citations

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    Cited by:

    1. Domenico Buccella & Luciano Fanti, 2022. "Downstream competition and profits under different input price bargaining structures," Journal of Economics, Springer, vol. 136(3), pages 251-268, August.
    2. Wentao Yi & Chunqiao Tan, 2019. "Bertrand Game with Nash Bargaining Fairness Concern," Complexity, Hindawi, vol. 2019, pages 1-22, August.
    3. Chang Fang & Zhuangzhuang You & Yudou Yang & Duomei Chen & Samar Mukhopadhyay, 2020. "Is third-party remanufacturing necessarily harmful to the original equipment manufacturer?," Annals of Operations Research, Springer, vol. 291(1), pages 317-338, August.
    4. Jiaqi Chen & Sang‐Ho Lee, 2023. "Cournot–Bertrand comparisons under R&D competition: Output versus R&D subsidies," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(1), pages 77-100, March.
    5. Stanislav Stoykov & Ivan Kostov, 2023. "Price Competition with Differentiated Products on a Two-Dimensional Plane: The Impact of Partial Cartel on Firms’ Profits and Behavior," Games, MDPI, vol. 14(2), pages 1-25, March.
    6. Kangsik Choi & Seonyoung Lim, 2023. "Input Price Discrimination in Endogenous Competition Mode," The Japanese Economic Review, Springer, vol. 74(2), pages 301-330, April.

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    More about this item

    Keywords

    Bargaining; Bertrand; Cournot; Centralised bargaining; Vertical pricing; Welfare;
    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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