Bilateral monopolies and location choice
We analyse how equilibrium locations in location-price games à la Hotelling are affected when firms acquire inputs through bilateral monopoly relations with suppliers. Assuming a duopoly downstream market, we consider the case of two independent input suppliers bargaining with both downstream firms. We find that the presence of input suppliers changes the locational incentives of downstream firms in several ways, compared with the case of exogenous production costs. Bargaining induces downstream firms to locate further apart, despite the fact that input prices increase with the distance between the firms. In the case of asymmetrical bargaining strengths, the downstream firm facing the stronger input supplier has a strategic advantage and locates closer to the market centre. Sequential location introduces a first-mover advantage which may be mitigated or reinforced, depending on whether or not it is the first mover that bargains with the stronger input supplier.
|Date of creation:||15 Jan 2002|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.uib.no/econ/en
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Tabuchi, T. & Thisse, J.-F., .
"Asymetric equilibria in spatial competition,"
CORE Discussion Papers RP
-1151, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979.
"On Hotelling's "Stability in Competition","
Econometric Society, vol. 47(5), pages 1145-50, September.
- Jehiel, Philippe, 1992. "Product differentiation and price collusion," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 633-641, December.
- Davidson, Carl, 1988. "Multiunit Bargaining in Oligopolistic Industries," Journal of Labor Economics, University of Chicago Press, vol. 6(3), pages 397-422, July.
- Mayer, Thierry, 2000.
"Spatial Cournot competition and heterogeneous production costs across locations,"
Regional Science and Urban Economics,
Elsevier, vol. 30(3), pages 325-352, May.
- Mayer, T., 1999. "Spatial Cournot Competition and Heterogeneous Production Costs Across Locations," Papiers d'Economie MathÃ©matique et Applications 1999.89, UniversitÃ© PanthÃ©on-Sorbonne (Paris 1).
- Riordan, Michael H. & Williamson, Oliver E., 1985. "Asset specificity and economic organization," International Journal of Industrial Organization, Elsevier, vol. 3(4), pages 365-378, December.
- Grandner, Thomas, 2001. "Unions in oligopolistic, vertically connected industries," European Economic Review, Elsevier, vol. 45(9), pages 1723-1740, October.
- repec:cup:cbooks:9780521464673 is not listed on IDEAS
- Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, vol. 73(4), pages 519-40, September.
- Neven, Damien J., 1986.
"On Hotelling's competition with non-uniform customer distributions,"
Elsevier, vol. 21(2), pages 121-126.
- Neven, D., 1985. "On hotelling’s competition with non uniform customer distributions," CORE Discussion Papers 1985044, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- James W. Friedman & Jacques-Francois Thisse, 1993.
"Partial Collusion Fosters Minimum Product Differentiation,"
RAND Journal of Economics,
The RAND Corporation, vol. 24(4), pages 631-645, Winter.
- FRIEDMAN, James W. & THISSE, Jacques-François, . "Partial collusion fosters minimum product differentiation," CORE Discussion Papers RP -1070, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- 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.
- Bughin, Jacques, 1999. "The strategic choice of union-oligopoly bargaining agenda," International Journal of Industrial Organization, Elsevier, vol. 17(7), pages 1029-1040, October.
- Mai, Chao-cheng & Peng, Shin-kun, 1999. "Cooperation vs. competition in a spatial model," Regional Science and Urban Economics, Elsevier, vol. 29(4), pages 463-472, July.
- Rath, Kali P. & Zhao, Gongyun, 2001. "Two stage equilibrium and product choice with elastic demand," International Journal of Industrial Organization, Elsevier, vol. 19(9), pages 1441-1455, November.
- Gupta, Barnali & Katz, Amoz & Pal, Debashis, 1994. "Upstream monopoly, downsteam competition and spatial price discrimination," Regional Science and Urban Economics, Elsevier, vol. 24(5), pages 529-542, October.
- Lambertini, Luca, 1997. "Unicity of the equilibrium in the unconstrained Hotelling model," Regional Science and Urban Economics, Elsevier, vol. 27(6), pages 785-798, November.
- Anderson, Simon P. & Goeree, Jacob K. & Ramer, Roald, 1997. "Location, Location, Location," Journal of Economic Theory, Elsevier, vol. 77(1), pages 102-127, November.
When requesting a correction, please mention this item's handle: RePEc:hhs:bergec:2002_003. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kjell Erik Lommerud)
If references are entirely missing, you can add them using this form.