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Cournot is more competitive than Bertrand! Upstream Monopoly with Two-part Tariffs

  • Maria Alipranti

    ()

    (University of Crete)

  • Emmanuel Petrakis

    ()

    (Department of Economics, University of Crete, Greece)

The present paper compares the Cournot and Bertrand equilibrium outcomes and social welfare in vertically related markets with upstream monopolistic market structure, where the trade between the upstream monopolist and the downstream firms is conducted via two-part tariffs contracts. We show that the equilibrium quantities, the profits of the downstream firms, the consumers' surplus and the social welfare are always higher under Cournot final market competition than under Bertrand final market competition. On the contrary the equilibrium profits of the upstream monopolist under Bertrand market competition always exceed those obtained under Cournot market competition.

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File URL: http://economics.soc.uoc.gr/wpa/docs/BertrandvsCournot_5_2013.pdf
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Paper provided by University of Crete, Department of Economics in its series Working Papers with number 1305.

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Length: 21 pages
Date of creation: 29 Aug 2012
Date of revision: 08 May 2013
Handle: RePEc:crt:wpaper:1305
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  1. Arijit Mukherjee, 2011. "Competition, Innovation And Welfare," Manchester School, University of Manchester, vol. 79(6), pages 1045-1057, December.
  2. Okuguchi, Koji, 1987. "Equilibrium prices in the Bertrand and Cournot oligopolies," Journal of Economic Theory, Elsevier, vol. 42(1), pages 128-139, June.
  3. Symeonidis, George, 2003. "Comparing Cournot and Bertrand equilibria in a differentiated duopoly with product R&D," International Journal of Industrial Organization, Elsevier, vol. 21(1), pages 39-55, January.
  4. Luciano Fanti & Nicola Meccheri, 2010. "The Cournot-Bertrand profit differential in a differentiated duopoly with unions and labour decreasing returns," Discussion Papers 2010/107, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  5. Dastidar, Krishnendu Ghosh, 1997. "Comparing Cournot and Bertrand in a Homogeneous Product Market," Journal of Economic Theory, Elsevier, vol. 75(1), pages 205-212, July.
  6. Patrick Rey & Thibaud Verge, 2002. "Bilateral Control with Vertical Contracts," The Centre for Market and Public Organisation 02/048, Department of Economics, University of Bristol, UK.
  7. 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, 09.
  8. Milliou, Chrysovalantou & Petrakis, Emmanuel, 2007. "Upstream horizontal mergers, vertical contracts, and bargaining," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 963-987, October.
  9. Joshua Gans & Catherine de Fontenay, 2004. "Vertical Integration in the Presence of Upstream Competition," Econometric Society 2004 North American Winter Meetings 7, Econometric Society.
  10. McAfee, R Preston & Schwartz, Marius, 1994. "Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity," American Economic Review, American Economic Association, vol. 84(1), pages 210-30, March.
  11. Leonard Cheng, 1985. "Comparing Bertrand and Cournot Equilibria: A Geometric Approach," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 146-152, Spring.
  12. Qiu, Larry D., 1997. "On the Dynamic Efficiency of Bertrand and Cournot Equilibria," Journal of Economic Theory, Elsevier, vol. 75(1), pages 213-229, July.
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