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Industry profits and free entry in input markets

Author

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  • Noriaki Matsushima

    (Graduate School of Business Administration, Kobe University)

Abstract

When upstream firms compete in quantity and freely enter the input market, competition among downstream firms reduces the input price (the marginal cost of downstream firms). The industry profits of downstream firms competing in quantity can increase with the number of downstream firms.

Suggested Citation

  • Noriaki Matsushima, 2005. "Industry profits and free entry in input markets," Discussion Papers 2005-20, Kobe University, Graduate School of Business Administration.
  • Handle: RePEc:kbb:dpaper:2005-20
    as

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    File URL: http://www.b.kobe-u.ac.jp/paper/2005_20.pdf
    File Function: First version, 2005
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    References listed on IDEAS

    as
    1. Lin, Ping, 2006. "Strategic spin-offs of input divisions," European Economic Review, Elsevier, vol. 50(4), pages 977-993, May.
    2. Naylor, Robin A., 2002. "Industry profits and competition under bilateral oligopoly," Economics Letters, Elsevier, vol. 77(2), pages 169-175, October.
    3. 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.
    4. Lahiri, Sajal & Ono, Yoshiyasu, 1995. "The Role of Free Entry in an Oligopolistic Heckscher-Ohlin Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(3), pages 609-624, August.
    5. Michael A. Salinger, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, Oxford University Press, vol. 103(2), pages 345-356.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Erotokritos Varelas, 2014. "Bank structure and public debt," Discussion Paper Series 2014_06, Department of Economics, University of Macedonia, revised Sep 2014.
    2. Naylor, Robin A & Soegaard, Christian, 2014. "The Effects of Entry in Oligopoly with Bargained Wages," The Warwick Economics Research Paper Series (TWERPS) 1044, University of Warwick, Department of Economics.
    3. Naylor, Robin & Soegaard, Christian, 2014. "The Effects of Entry in Oligopoly with Bargained Wages," Economic Research Papers 270239, University of Warwick - Department of Economics.
    4. Fanti, Luciano & Meccheri, Nicola, 2014. "Profits and competition under alternative technologies in a unionized duopoly with product differentiation," Research in Economics, Elsevier, vol. 68(2), pages 157-168.
    5. Tomomichi Mizuno, 2009. "Divisionalization And Horizontal Mergers In A Vertical Relationship," Manchester School, University of Manchester, vol. 77(3), pages 317-336, June.
    6. Noriaki Matsushima & Laixun Zhao, 2010. "Multimarket linkages, buyer power, and the productivity puzzle," ISER Discussion Paper 0797, Institute of Social and Economic Research, Osaka University.
    7. Yamada, Mai, 2016. "The Optimal Trading Partner for an Upstream Monopolist," MPRA Paper 70325, University Library of Munich, Germany.
    8. Ioannis Pinopoulos, 2014. "Downstream Market Power and the Lerner Index," Discussion Paper Series 2014_07, Department of Economics, University of Macedonia, revised Nov 2014.
    9. Ioannis N. Pinopoulos, 2011. "Input foreclosure under alternative entry conditions in the upstream market," Discussion Paper Series 2011_15, Department of Economics, University of Macedonia, revised Nov 2011.
    10. Arijit Mukherjee & Udo Broll & Soma Mukherjee, 2009. "The welfare effects of entry: the role of the input market," Journal of Economics, Springer, vol. 98(3), pages 189-201, December.
    11. Ioannis N. Pinopoulos, 2014. "Equilibrium downstream mark-up and upstream free entry," Discussion Paper Series 2014_02, Department of Economics, University of Macedonia, revised Sep 2014.
    12. Franz Wirl, 2015. "Downstream and upstream oligopolies when retailer’s effort matters," Journal of Economics, Springer, vol. 116(2), pages 99-127, October.

    More about this item

    Keywords

    Cournot competition; input markets; free entry; profits;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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