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Oligopolistic Upstream Competition with Differentiated Inputs

Author

Listed:
  • Joachim Heinzel

    (Paderborn University)

  • Simon Hoof

    (Paderborn University)

Abstract

We consider a vertical supply chain that consists of a downstream final good producer and n >= 2 upstream intermediate good producers. The final good producer transforms the n differentiated inputs into an output good via a CES production function and sells the composed good to the final consumers. We study the impact of upstream price and upstream quantity competition on the supply chain. We find that the intermediate good producers prefer price over quantity competition when the inputs are complements and vice versa when they are substitutes. However, the final good producer and the consumers prefer price over quantity competition for all degrees of input differentiation. We additionally observe that the welfare optimal solution materializes when a horizontally integrated upstream market merges vertically with the downstream producer.

Suggested Citation

  • Joachim Heinzel & Simon Hoof, 2020. "Oligopolistic Upstream Competition with Differentiated Inputs," Working Papers CIE 129, Paderborn University, CIE Center for International Economics.
  • Handle: RePEc:pdn:ciepap:129
    as

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    File URL: http://groups.uni-paderborn.de/wp-wiwi/RePEc/pdf/ciepap/WP129.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    CES production function; Input competition; Product differentiation;
    All these keywords.

    JEL classification:

    • L00 - Industrial Organization - - General - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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