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Cost Reducing Strategies

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  • Olivella, P.
  • Pastor, M.

Abstract

We analyze an industry where a dominant buyer may foreclose its rivals (with whom competes a la Cournot in the final good market) from access to an efficient supplier of an intermediate good. We prove that the presence of asymmetric information between this dominant buyer and its supplier may mitigate the incentives for the dominant buyer to exert such a vertical restraint. If the dominant buyer's bargaining power is not too strong, the presence of such an informal asymmetry has a positive impact on welfare.

Suggested Citation

  • Olivella, P. & Pastor, M., 1997. "Cost Reducing Strategies," UFAE and IAE Working Papers 402.97, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    • Handle: RePEc:aub:autbar:402.97
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    Keywords

    INFORMATION ; MARKET STRUCTURE;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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