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Cournot vs. Bertrand Competitions in a Vertical Relationship with Separate Downstream Markets

Author

Listed:
  • Aika Monden

    (Graduate School of Management, Kyoto University)

  • Shuhei Takezawa

    (Institute of Social and Economic Research , Osaka University)

  • Tomomichi Mizuno

    (Graduate School of Economics, Kobe University)

Abstract

Contrary to conventional wisdom, our analysis of vertical relationships involving two geographically distinct downstream markets challenges the notion that Bertrand competition yields lower profits than Cournot competition. We demonstrate that when the market size where two downstream firms compete on either quantity or price is smaller than the other downstream market, the input price in downstream Bertrand competition is lower compared to Cournot competition. Therefore, this may result in higher profits for downstream firms under Bertrand competition.

Suggested Citation

  • Aika Monden & Shuhei Takezawa & Tomomichi Mizuno, 2023. "Cournot vs. Bertrand Competitions in a Vertical Relationship with Separate Downstream Markets," Discussion Papers 2318, Graduate School of Economics, Kobe University.
    • Handle: RePEc:koe:wpaper:2318
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