Economics at your fingertips  

Buyer power with atomistic upstream entry: Can downstream consolidation increase production and welfare?

Pierre Mérel and Richard J. Sexton

International Journal of Industrial Organization, 2017, vol. 50, issue C, 259-293

Abstract: This paper investigates the effects of buyer power on entry into an atomistic upstream market and economic welfare. Under reasonable market conditions, we show that industries with a few buyers induce more upstream entry than industries with a larger number of firms. In particular, monopsony can be more conducive to entry and lead to higher social welfare than more fragmented industry structures. This seeming paradox arises because a single buyer better internalizes the positive effects of entry on later-periods’ supply conditions than a collection of firms. This result is relevant in a number of market settings, including markets for specialized labor and processing markets for agricultural products.

Keywords: Industry concentration; Monopsony power; Hold up; Entry; Merger (search for similar items in EconPapers)
JEL-codes: L1 L4 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

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:

Access Statistics for this article

International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal

More articles in International Journal of Industrial Organization from Elsevier
Series data maintained by Dana Niculescu ().

Page updated 2017-11-18
Handle: RePEc:eee:indorg:v:50:y:2017:i:c:p:259-293