Equilibrium strategic overbuying
We consider two firms competing both to sell their output and purchase their input from an upstream firm, to which they offer non-linear contracts. Firms may engage in strategic overbuying, purchasing more of the input when the supplier is capacity constrained than when it is not in order to exclude their competitor from the final market. Warehousing is a special case in which a downstream firm purchases more input than it uses and disposes of the rest. We show that both types of overbuying happen in equilibrium. The welfare analysis leads to ambiguous conclusions.
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- GABSZEWICZ, Jean J. & ZANAJ, Skerdilajda, 2006.
"Upstream market foreclosure,"
CORE Discussion Papers
2006043, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Jean j., GABSZEWICZ & Skerdilajda, ZANAJ, 2006. "Upstream market foreclosure," Discussion Papers (ECON - Département des Sciences Economiques) 2006024, Université catholique de Louvain, Département des Sciences Economiques.
- GABSZEWICZ, Jean J. & ZANAJ, Skerdilajda, . "Upstream market foreclosure," CORE Discussion Papers RP -2008, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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2005-31, Centre de Recherche en Economie et Statistique.
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Recherches économiques de Louvain,
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