Cascading contingent protection and vertical market structure
Cascading contingent protection may occur when protection of an upstream industry transfers injury to the downstream industry and increases the likelihood that this industry asks and receives protection. This paper shows that the political economy of cascading contingent protection can be represented by a sequential bidding game in expected payoffs where the upstream industry acts as a Stackelberg leader. A simple model of competition in, and vertical linkage between, an upstream and downstream industry is developed to examine in which type of industries cascading contingent protection is most likely to occur. Analysis of welfare effects shows that the circumstances which make cascading protection more likely to occur, also make it more likely that it has serious negative welfare consequences.
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- Waterson, Michael, 1982. "Vertical Integration, Variable Proportions and Oligopoly," Economic Journal, Royal Economic Society, vol. 92(365), pages 129-44, March.
- Hoekman, Bernard M. & Leidy, Michael P., 1992. "Cascading contingent protection," European Economic Review, Elsevier, vol. 36(4), pages 883-892, May.
- Greenhut, M L & Ohta, H, 1979. "Vertical Integration of Successive Oligopolists," American Economic Review, American Economic Association, vol. 69(1), pages 137-41, March.
- Barbara J. Spencer & James A. Brander, 1982. "Tariff Protection and Imperfect Competition," Working Papers 517, Queen's University, Department of Economics.
- Robert M. Feinberg & Seth Kaplan, 1993. "Fishing Downstream: The Political Economy of Effective Administered Protection," Canadian Journal of Economics, Canadian Economics Association, vol. 26(1), pages 150-58, February.
- Abiru, Masahiro, 1988. "Vertical Integration, Variable Proportions and Successive Oligopolies," Journal of Industrial Economics, Wiley Blackwell, vol. 36(3), pages 315-25, March.
- Stahl, Dale O, II, 1988. "Bertrand Competition for Inputs and Walrasian Outcomes," American Economic Review, American Economic Association, vol. 78(1), pages 189-201, March.
- Michael A. Salinger, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, Oxford University Press, vol. 103(2), pages 345-356.
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