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

  • Pio Baake

    (Humboldt University, Berlin)

  • Jorg Oechssler

    (Humboldt University, Berlin)

  • Christoph Schenk

    (Wissenschaftszentrum Berlin)

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.

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Paper provided by EconWPA in its series Industrial Organization with number 9603005.

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Date of creation: 27 Mar 1996
Date of revision: 06 Apr 1996
Handle: RePEc:wpa:wuwpio:9603005
Note: FTP submission, ps-file. JEL numbers: L 13, L 22
Contact details of provider: Web page: http://econwpa.repec.org

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  1. 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.
  2. Salinger, Michael A, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, MIT Press, vol. 103(2), pages 345-56, May.
  3. Alexander Schrader & Stephen Martin, 1998. "Vertical Market Participation," Review of Industrial Organization, Springer, vol. 13(3), pages 321-331, June.
  4. 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, June.
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