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Downstream competition and profits under different input price bargaining structures

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  • Buccella, Domenico
  • Fanti, Luciano

Abstract

In a vertically related duopoly with input price bargaining, this paper re-examines the downstream firms’ profitability under different market competition degrees. Downstream firms earn highest profits with semi-collusion whose level depends on product differentiation and relative parties’ bargaining power. Holding fixed the upstream suppliers’ bargaining power, the more the products are differentiated, the higher the downstream firms’ collusive level that maximize profits, regardless of the negotiations’ structure. On the other hand, holding fixed the product differentiation degree: 1) with uncoordinated bargaining, the higher the upstream suppliers’ bargaining power is, the lower the downstream firms’ collusive level is; 2) with upstream firms’ bargaining coordination, a U-shaped relation exists between the upstream firms’ power and the downstream firms’ collusive level that maximizes their profits.

Suggested Citation

  • Buccella, Domenico & Fanti, Luciano, 2019. "Downstream competition and profits under different input price bargaining structures," MPRA Paper 92266, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:92266
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    References listed on IDEAS

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    Cited by:

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    2. Xu, Lili & Lee, Sang-Ho, 2024. "Endogenous competition with an integrated public utility firm under an output subsidy policy," Utilities Policy, Elsevier, vol. 87(C).

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    More about this item

    Keywords

    Decentralized/semi-coordinated bargaining; Right-to-Manage; Conjectural Variation model;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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