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Stackelberg Competition among Intermediaries in a Differentiated Duopoly with Product Innovation

Author

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  • Jochen Manegold

    (Paderborn University)

Abstract

On an intermediate goods market we consider vertical and horizontal product differentiation and analyze the impact of simultaneous competition for resources and the demand of customers on the market outcome. Asymmetries between intermediaries may arise due to distinct product qualities as well as by reasons of different production technologies. The intermediaries compete on the output market by choosing production quantities sequentially and for the supplies of a monopolistic input supplier on the input market. It turns out that there exist differences in product quality and productivities such that an intermediary being the Stackelberg leader has no incentive to procure inputs, whereas in the role of the Stackelberg follower will participate in the market. Moreover, we find that given an intermediary is more competitive, his equilibrium output quantity is higher when being the leader than when being the follower. Interestingly, if the intermediary is less competitive and goods are complements, there may exist asymmetries such that an intermediary being in the position of the Stackelberg follower offers higher output quantities in equilibrium than when being in the position of the Stackelberg leader.

Suggested Citation

  • Jochen Manegold, 2016. "Stackelberg Competition among Intermediaries in a Differentiated Duopoly with Product Innovation," Working Papers CIE 98, Paderborn University, CIE Center for International Economics.
    • Handle: RePEc:pdn:ciepap:98
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    References listed on IDEAS

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    More about this item

    Keywords

    Input Market; Product Quality; Quantity Competition; Stackelberg Competition; Product Innovation;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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