Forward contracting and the endogenous activity of heterogeneous firms

Sébastien Mitraille and Henry Thille

Journal of Economics & Management Strategy, 2025, vol. 34, issue 2, 557-592

Abstract: Forward contracting in an N N ‐firm quantity‐setting oligopoly with heterogeneous costs introduces the possibility that relatively efficient firms deter the activity of inefficient rivals by reducing their margins. The equilibrium number of firms producing positive quantities can be any of 1 , 2 , … N 1 , 2 , \unicode{x02026} N depending on the level of demand relative to firm‐specific activity thresholds, with more firms active at higher demand levels. If only one firm is active, the Bertrand outcome is obtained. This potential reduction of the number of active firms may lessen the procompetitive effect of forward sales, but does not eliminate it entirely. We explore the competition policy implications of the endogenous activity of firms, in particular for merger analysis.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/jems.12610

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jemstr:v:34:y:2025:i:2:p:557-592

Ordering information: This journal article can be ordered from
http://www.blackwell ... ref=1058-6407&site=1

Access Statistics for this article

More articles in Journal of Economics & Management Strategy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().