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Downstream mode of competition with upstream market power

Constantine Manasakis () and Minas Vlassis ()

Research in Economics, 2014, vol. 68, issue 1, 84-93

Abstract: In a two-tier oligopoly, where the downstream firms are locked in pair-wise exclusive relationships with their upstream input suppliers, the equilibrium mode of competition in the downstream market is endogenously determined as a renegotiation-proof contract signed between each downstream firm and its exclusive upstream input supplier. We find that the upstream–downstream exclusive relationships credibly sustain the Cournot (Bertrand) mode of competition in the downstream market, when the goods are substitutes (complements). In contrast to previous studies, this result holds irrespectively of the degree of product differentiation and the distribution of bargaining power between the upstream and the downstream firm, over the pair-specific input price.

Keywords: Oligopoly; Vertical relations; Wholesale prices; Equilibrium mode of competition (search for similar items in EconPapers)
Date: 2014
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Working Paper: Downstream mode of competition with upstream market power (2013) Downloads
Working Paper: Downstream Mode of Competition with Upstream Market Power (2010) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:68:y:2014:i:1:p:84-93

DOI: 10.1016/j.rie.2013.12.002

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