Supply and Demand Function Competition in Input-Output Networks
Matteo Bizzarri
CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy
Abstract:
This paper presents a model of non-infinitesimal firm-to-firm trade via competition in supply and demand functions relating quantities to prices. The main features of the model are two: first, firms have endogenous market power in both input and output markets; second, firms internalize their position in the supply chain. The former is important to rank market power across firms: in models in which firms are restricted to affect only output or only input prices the ranking of market power can be reversed. The latter is important for the assessment of aggregate distortions: final prices and distortions are higher than in a model where firms do not take their position in the supply chain into account. An equilibrium exists for general non-parametric technology, provided the best replies are convex-valued, under suitable regularity and boundedness assumptions. Under a suitable parametric functional form, the equilibrium is in linear schedules.
Keywords: production networks; oligopoly; double auction; supply function equilibrium. (search for similar items in EconPapers)
JEL-codes: D43 D44 D57 L13 (search for similar items in EconPapers)
Date: 2022-06-20, Revised 2023-03-09
New Economics Papers: this item is included in nep-com, nep-dem, nep-ind and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:648
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