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Price and Quantity Competition under Vertical Pricing

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  • Debasmita Basak

    (Nottingham University Business School, University of Nottingham, Jubilee Campus, Wollaton Road, Nottingham NG8 1BB, UK
    UNEC Energy Economics Centre, Azerbaijan State University of Economics, Baku AZ1001, Azerbaijan)

Abstract

We consider a vertically related market where one quantity-setting and another price-setting downstream firm negotiate the terms of a two-part tariff contract with an upstream input supplier. In contrast to the traditional belief, we show that the price-setting firm produces a higher output and earns a higher profit than the quantity-setting firm when bargaining is decentralised. Additionally, both firms produce the same output, whereas the profit is higher under the price-setting firm than the quantity-setting firm when bargaining is centralised.

Suggested Citation

  • Debasmita Basak, 2023. "Price and Quantity Competition under Vertical Pricing," Games, MDPI, vol. 14(4), pages 1-8, June.
    • Handle: RePEc:gam:jgames:v:14:y:2023:i:4:p:53-:d:1182873
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    References listed on IDEAS

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