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Market expansion may harm the supplier in a bilateral monopoly

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  • Noriaki Matsushima
  • Laixun Zhao

Abstract

We consider a bilateral monopoly with a supplier and a buyer. Their trading terms are determined through negotiations, but affected by the buyer's efforts to search for outside suppliers. We find surprisingly that a market expansion may harm the supplier.

Suggested Citation

  • Noriaki Matsushima & Laixun Zhao, 2018. "Market expansion may harm the supplier in a bilateral monopoly," ISER Discussion Paper 1040, Institute of Social and Economic Research, Osaka University.
  • Handle: RePEc:dpr:wpaper:1040
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    File URL: https://www.iser.osaka-u.ac.jp/library/dp/2018/DP1040.pdf
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    References listed on IDEAS

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    1. Roman Inderst & Tommaso Valletti, 2009. "Price discrimination in input markets," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 1-19, March.
    2. Alberto Iozzi & Tommaso Valletti, 2014. "Vertical Bargaining and Countervailing Power," American Economic Journal: Microeconomics, American Economic Association, vol. 6(3), pages 106-135, August.
    3. Davidson, Carl, 1988. "Multiunit Bargaining in Oligopolistic Industries," Journal of Labor Economics, University of Chicago Press, vol. 6(3), pages 397-422, July.
    4. 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.
    5. Henrick Horn & Asher Wolinsky, 1988. "Bilateral Monopolies and Incentives for Merger," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 408-419, Autumn.
    6. Noriaki Matsushima & Laixun Zhao, 2018. "Technology spillovers and outside options in a bilateral duopoly," ISER Discussion Paper 1039, Institute of Social and Economic Research, Osaka University.
    7. Inderst, Roman, 2007. "Leveraging buyer power," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 908-924, October.
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    1. Noriaki Matsushima & Laixun Zhao, 2018. "Technology spillovers and outside options in a bilateral duopoly," ISER Discussion Paper 1039, Institute of Social and Economic Research, Osaka University.

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