Oligopolistic Upstream Competition with Differentiated Inputs

Joachim Heinzel () and Simon Hoof ()
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Joachim Heinzel: Paderborn University
Simon Hoof: Paderborn University

No 129, Working Papers CIE from Paderborn University, CIE Center for International Economics

Abstract: We consider a vertical supply chain that consists of a downstream final good producer and n >= 2 upstream intermediate good producers. The final good producer transforms the n differentiated inputs into an output good via a CES production function and sells the composed good to the final consumers. We study the impact of upstream price and upstream quantity competition on the supply chain. We find that the intermediate good producers prefer price over quantity competition when the inputs are complements and vice versa when they are substitutes. However, the final good producer and the consumers prefer price over quantity competition for all degrees of input differentiation. We additionally observe that the welfare optimal solution materializes when a horizontally integrated upstream market merges vertically with the downstream producer.

Keywords: CES production function; Input competition; Product differentiation (search for similar items in EconPapers)
JEL-codes: L00 L13 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2020-02
New Economics Papers: this item is included in nep-com, nep-ind and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pdn:ciepap:129

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