Price Versus Quantity Competition in a Vertically Related Market with Retailer’s Effort

Liu Qian () and Wang Leonard F. S. ()
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Liu Qian: International Service Economic Research Institute, Guangdong University of Foreign Studies, Guangzhou, P.R. China
Wang Leonard F. S.: Wenlan School of Business, Zhongnan University of Economics and Law, Wuhan, China

The B.E. Journal of Theoretical Economics, 2022, vol. 22, issue 1, 51-66

Abstract: Allowing downstream retailers to engage in demand-enhancing investment, this paper demonstrates that the classical conclusions regarding the comparison of Cournot and Bertrand competition in a vertically related market with decentralized bargaining are completely reversed. It shows that Bertrand competition is more efficient than Cournot competition, in the sense that both consumer surplus and social welfare are always higher in the former.

Keywords: Cournot; Bertrand; vertically-related market; decentralized bargaining; promotional effort (search for similar items in EconPapers)
JEL-codes: D43 L13 L14 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1515/bejte-2020-0036

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