Stackelberg Competition among Intermediaries in a Differentiated Duopoly with Product Innovation

Jochen Manegold ()
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Jochen Manegold: Paderborn University

No 98, Working Papers CIE from Paderborn University, CIE Center for International Economics

Abstract: On an intermediate goods market we consider vertical and horizontal product differentiation and analyze the impact of simultaneous competition for resources and the demand of customers on the market outcome. Asymmetries between intermediaries may arise due to distinct product qualities as well as by reasons of different production technologies. The intermediaries compete on the output market by choosing production quantities sequentially and for the supplies of a monopolistic input supplier on the input market. It turns out that there exist differences in product quality and productivities such that an intermediary being the Stackelberg leader has no incentive to procure inputs, whereas in the role of the Stackelberg follower will participate in the market. Moreover, we find that given an intermediary is more competitive, his equilibrium output quantity is higher when being the leader than when being the follower. Interestingly, if the intermediary is less competitive and goods are complements, there may exist asymmetries such that an intermediary being in the position of the Stackelberg follower offers higher output quantities in equilibrium than when being in the position of the Stackelberg leader.

Keywords: Input Market; Product Quality; Quantity Competition; Stackelberg Competition; Product Innovation (search for similar items in EconPapers)
JEL-codes: C72 D43 L13 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2016-09
New Economics Papers: this item is included in nep-com, nep-ind and nep-ino
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Persistent link: https://EconPapers.repec.org/RePEc:pdn:ciepap:98

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