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Bertrand competition in vertically related markets

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  • Tomomichi Mizuno
  • Kazuhiro Takauchi

Abstract

We build a successive Bertrand model with a homogenous good. We show that increasing the production efficiency of an industry can reduce firms’ profits. We also show that this result holds in the successive Cournot model. Hence, an industrial policy aimed at improving production efficiency may be undesirable for firms.

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  • Tomomichi Mizuno & Kazuhiro Takauchi, 2024. "Bertrand competition in vertically related markets," Applied Economics Letters, Taylor & Francis Journals, vol. 31(6), pages 524-529, March.
    • Handle: RePEc:taf:apeclt:v:31:y:2024:i:6:p:524-529
    DOI: 10.1080/13504851.2022.2140101
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    References listed on IDEAS

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    1. Matsushima, Noriaki, 2006. "Industry profits and free entry in input markets," Economics Letters, Elsevier, vol. 93(3), pages 329-336, December.
    2. Marie‐Laure Cabon‐Dhersin & Nicolas Drouhin, 2014. "Tacit Collusion in a One‐Shot Game of Price Competition with Soft Capacity Constraints," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(2), pages 427-442, June.
    3. David Flath, 2012. "Are There Any Cournot Industries in Japan?," Japanese Economy, Taylor & Francis Journals, vol. 39(2), pages 3-36.
    4. Marie‐Laure Cabon‐Dhersin & Nicolas Drouhin, 2014. "Tacit Collusion in a One‐Shot Game of Price Competition with Soft Capacity Constraints," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(2), pages 427-442, June.
    5. Michael A. Salinger, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(2), pages 345-356.
    6. Tomomichi Mizuno & Kazuhiro Takauchi, 2020. "Optimal Export Policy With Upstream Price Competition," Manchester School, University of Manchester, vol. 88(2), pages 324-348, March.
    7. Mukherjee, Arijit, 2019. "Profit raising entry in a vertical structure," Economics Letters, Elsevier, vol. 183(C), pages 1-1.
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    Cited by:

    1. Kazuhiro Takauchi & Tomomichi Mizuno & Katsufumi Fukuda, 2024. "Strategic export decisions in international trade," Discussion Papers 2401, Graduate School of Economics, Kobe University.

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