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Predatory accomodation in vertical contracting with externalities

Listed author(s):
  • Bontems, P.
  • Bouamra-Mechemache, Z.

We analyse vertical contracts between manufacturers and a common retailer in a channel including the uptstream input market. The oligopsonistic behavior of manufacturers on the ustream market provides a new explanation for predatory accomodation. With two-parts tariff, we show that joint profit of the industry is not maximised at simultaneous intermediate good market, when final products are substitutes, ant that it may be welfare negotiations and the retailer may jointly prefer above marginal cost pricing or not, depending on the distribution of bargaining power in the channel. However, the second manufacturer equilibrium wholesale price is set below marginal cost. ...French Abstract : Les auteurs analysent les contrats verticaux entre des producteurs et un distributeur commun dans une filière incluant un marché amont pour l'approvisionnement en input. Le comportement oligopolistique des producteurs sur le marché amont fournit une nouvelle explication pour une tarification au-dessous du coût marginal (predaroty accomodation). Avec des tarifs binômes, les auteurs montrent que le profit joint de l'industrie n'est pas maximisé à l'équilibre d'un jeu simultané de négociations bilatérales. Ils montrent également que les biens intermédiaires sont tarifés au-dessous du coût marginal lorsque les produits finaux sont substituts et que cette tarification peut avoir des effets positifs sur le bien-être. Avec un jeu de négociations séquentielles, les auteurs montrent que le producteur qui est le premier à négocier et le distributeur préfèrent de façon jointe une tarification au-dessus du coût marginal ou non selon la distribution du pouvoir de marchandage dans la filière. Cependant, le prix de gros à l'équilibre du second producteur est établi au-dessous du coût marginal.

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Paper provided by French Institute for Agronomy Research (INRA), Economics Laboratory in Toulouse (ESR Toulouse) in its series Economics Working Paper Archive (Toulouse) with number 200402.

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Length: 35 p.
Date of creation: 2004
Handle: RePEc:rea:inrawp:200402
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INRA ESR - BP27 - 31326 Castanet Tolosan cedex - France

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Order Information: Postal: INRA ESR - BP27 - 31326 Castanet Tolosan cedex - France

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  1. Irmen, Andreas, 1997. "Note on duopolistic vertical restraints," European Economic Review, Elsevier, vol. 41(8), pages 1559-1567, August.
  2. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
  3. Mingxia Zhang, 1997. "The Effects of Imperfect Competition on the Size and Distribution of Research Benefits," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1252-1265.
  4. McAfee, R Preston & Schwartz, Marius, 1994. "Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity," American Economic Review, American Economic Association, vol. 84(1), pages 210-230, March.
  5. Stephen F. Hamilton & David Sunding, 1998. "Returns to Public Investments in Agriculture with Imperfect Downstream Competition," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(4), pages 830-838.
  6. Stephen F. Hamilton & David L. Sunding, 1997. "The Effect of Farm Supply Shifts on Concentration and Market Power in the Food Processing Sector," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 524-531.
  7. Joyce J. Wann & Sexton Richard J., 1992. "Imperfect Competition in Multiproduct Food Industries with Application to Pear Processing," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(4), pages 980-990.
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