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"Explaining Cross-Supplies" (replaces the old version which did not contain the graphs)

Author

Listed:
  • Pio Baake

    (Humboldt University, Berlin)

  • Jorg Oechssler

    (Humboldt University, Berlin)

  • Christoph Schenk

    (Wissenschaftszentrum Berlin)

Abstract

Cross-supplies describe the phenomenon that two or more firms in the same industry supply each other with their final products. A prominent example is the cooperation in the European flat glass industry, which was recently criticized by the European Commission. In a simple model we try to explain what incentives firms may have to use cross-supplies (instead of producing the goods themselves) and what welfare effects cross-supplies have if they are used. Contrary to the ruling of the European Commission we find that cross-supplies are welfare improving whenever they are employed. Furthermore, for a large range of parameters, they are even benefiting consumers.

Suggested Citation

  • Pio Baake & Jorg Oechssler & Christoph Schenk, 1996. ""Explaining Cross-Supplies" (replaces the old version which did not contain the graphs)," Industrial Organization 9603005, EconWPA, revised 06 Apr 1996.
  • Handle: RePEc:wpa:wuwpio:9603005
    Note: FTP submission, ps-file. JEL numbers: L 13, L 22
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    References listed on IDEAS

    as
    1. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, January.
    2. Michael A. Salinger, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, Oxford University Press, vol. 103(2), pages 345-356.
    3. Auerbach, Alan J., 1985. "The theory of excess burden and optimal taxation," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 2, pages 61-127 Elsevier.
    4. Alexander Schrader & Stephen Martin, 1998. "Vertical Market Participation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 13(3), pages 321-331, June.
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    JEL classification:

    • L - Industrial Organization

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