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Equilibrium strategic overbuying

Author

Listed:
  • Eric Avenel

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

  • Clémence Christin

    (DICE - Düsseldorf Institute for Competition Economics - Heinrich Heine Universität Düsseldorf = Heinrich Heine University [Düsseldorf])

Abstract

We consider two firms competing both to sell their output and purchase their input from an upstream firm, to which they offer non-linear contracts. Firms may engage in strategic overbuying, purchasing more of the input when the supplier is capacity constrained than when it is not in order to exclude their competitor from the final market. Warehousing is a special case in which a downstream firm purchases more input than it uses and disposes of the rest. We show that both types of overbuying happen in equilibrium. The welfare analysis leads to ambiguous conclusions.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Eric Avenel & Clémence Christin, 2012. "Equilibrium strategic overbuying," Post-Print halshs-00766991, HAL.
    • Handle: RePEc:hal:journl:halshs-00766991
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    Cited by:

    1. Zhou, Pin & Xu, He & Wang, Hongwei, 2020. "Value of by-product synergy: A supply chain perspective," European Journal of Operational Research, Elsevier, vol. 285(3), pages 941-954.
    2. Zhibin (Ben) Yang & Xinxin Hu & Haresh Gurnani & Huiqi Guan, 2018. "Multichannel Distribution Strategy: Selling to a Competing Buyer with Limited Supplier Capacity," Management Science, INFORMS, vol. 64(5), pages 2199-2218, May.

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    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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