What Determines Market Structure? An Explanation from Cooperative Investment with Non‐Exclusive Co
In a common agency setting, where the common buyer undertakes cooperative investment with her suppliers, we obtain a direct link between the level of ex-post competition and investment which affects the market structure of the supply side of the market. We show that more competitive equilibria are associated with a larger and more homogeneous distribution of investment among active suppliers, and an equilibrium with no investment might occur when competition is mild. In our model, buyer's investment works as a mechanism to incentivize competition, and its effectiveness is positively related to the level of competition ex-post. In general, the equilibrium investment profile is lower than efficiency, and we surprisingly find that higher competitive markets may sustain a larger number of suppliers.
|Date of creation:||26 Mar 2014|
|Date of revision:|
|Contact details of provider:|| Phone: (+33) 5 61 12 86 23|
Web page: http://www.tse-fr.eu/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Tommaso Valletti, 2000. "Switching Costs in Vertically Related Markets," Review of Industrial Organization, Springer, vol. 17(4), pages 395-409, December.
- Roig, Guillem, 2014. "Competition and the Hold‐U p Problem: a Setting with Non‐exclusive Contracts," TSE Working Papers 14-481, Toulouse School of Economics (TSE).
- Hori Kazumi, 2006.
"Inefficiency in a Bilateral Trading Problem with Cooperative Investment,"
The B.E. Journal of Theoretical Economics,
De Gruyter, vol. 6(1), pages 1-9, July.
- Hori, Kazumi, 2005. "Inefficiency in a Bilateral Trading Problem with Cooperative Investment," Discussion Papers 2005-02, Graduate School of Economics, Hitotsubashi University.
When requesting a correction, please mention this item's handle: RePEc:tse:wpaper:28043. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.