Downstream competition and profits under different input price bargaining structures

Domenico Buccella and Luciano Fanti

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Decentralized/semi-coordinated bargaining; Right-to-Manage; Conjectural Variation model (search for similar items in EconPapers)
JEL-codes: D43 J51 L13 (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-bec, nep-com, nep-gth, nep-hme, nep-ind and nep-mic
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Related works:
Journal Article: Downstream competition and profits under different input price bargaining structures (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:92266

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