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Does market concentration of downstream buyers squeeze upstream suppliers’ market power?

Author

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  • Carlos F. Alves

    () (CEF.UP, Faculdade de Economia, Universidade do Porto)

  • Cristina Barbot

    () (CEF.UP, Faculdade de Economia, Universidade do Porto)

Abstract

Using a theoretical model, we examine both the relationship between a downstream dominant firm’s market share and an upstream monopoly’s Lerner index and the relationship between upstream and downstream price elasticities of demand, in a regulated industry context. We undertake an empirical study that confirms our theoretical predictions, namely that the market share of a leader downstream firm is significant in explaining the upstream producers’ Lerner indexes. Also in accordance with the results of the theoretical model, the Lerner index is negatively influenced by the competition that suppliers face and by the level of economies of density, amongst other variables.

Suggested Citation

  • Carlos F. Alves & Cristina Barbot, 2010. "Does market concentration of downstream buyers squeeze upstream suppliers’ market power?," FEP Working Papers 387, Universidade do Porto, Faculdade de Economia do Porto.
  • Handle: RePEc:por:fepwps:387
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    File URL: http://www.fep.up.pt/investigacao/workingpapers/10.09.23_wp387.pdf
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    References listed on IDEAS

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    1. Gianni De Fraja & Alberto Iozzi, "undated". "Short Term and Long Term Effects of Price Cap Regulation," Discussion Papers 00/61, Department of Economics, University of York.
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    Cited by:

    1. Barbot, Cristina & D’Alfonso, Tiziana & Malighetti, Paolo & Redondi, Renato, 2013. "Vertical collusion between airports and airlines: An empirical test for the European case," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 57(C), pages 3-15.

    More about this item

    Keywords

    vertical relations; buyers’ market power;

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