Downstream Competition, Bargaining, and Welfare

George Symeonidis ()

Journal of Economics & Management Strategy, 2008, vol. 17, issue 1, 247-270

Abstract: I analyze 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. 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.

Date: 2008
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https://doi.org/10.1111/j.1530-9134.2008.00177.x

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