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Multilateral Market Power in Input-output Networks

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Abstract

This paper models firm-to-firm trade in a production network as a set of double auctions. Firms have “multilateral market power”, namely, can affect prices in both input and output markets. The size and division of surplus are endogenous and depend only on technology, network position, and consumer preferences. The standard simplifying assumption of price-taking on input markets (“unilateral market power”) has systematic effects: it underestimates the final price and overestimates the surplus going upstream. These phenomena affect the model predictions for the welfare impact of mergers.

Suggested Citation

  • Matteo Bizzarri, 2022. "Multilateral Market Power in Input-output Networks," CSEF Working Papers 648, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 23 Mar 2026.
    • Handle: RePEc:sef:csefwp:648
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    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
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis

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