Downstream Competition, Bargaining and Welfare

George Symeonidis ()

Economics Discussion Papers from University of Essex, Department of Economics

Abstract: I analyse the effects of downstream competition when there is bargaining between downstream firms and upstream agents (firms or unions). When bargaining is over a uniform input price, a decrease in the intensity of competition (or a merger) between downstream firms may raise consumer surplus and overall welfare. When bargaining is over a two-part tariff, a decrease in the intensity of competition reduces downstream profits and upstream utility and raises consumer surplus and overall welfare. In both cases, standard welfare results of oligopoly theory can be reversed: less competition can be unprofitable for firms and/or beneficial for consumers and society as a whole.

New Economics Papers: this item is included in nep-bec, nep-com, nep-ind and nep-mic
Date: 2007-03-02
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