Price and Quantity Competition under Vertical Pricing

Debasmita Basak ()
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Debasmita Basak: Nottingham University Business School, University of Nottingham, Jubilee Campus, Wollaton Road, Nottingham NG8 1BB, UK

Games, 2023, vol. 14, issue 4, 1-8

Abstract: We consider a vertically related market where one quantity-setting and another price-setting downstream firm negotiate the terms of a two-part tariff contract with an upstream input supplier. In contrast to the traditional belief, we show that the price-setting firm produces a higher output and earns a higher profit than the quantity-setting firm when bargaining is decentralised. Additionally, both firms produce the same output, whereas the profit is higher under the price-setting firm than the quantity-setting firm when bargaining is centralised.

Keywords: bargaining; Bertrand; Cournot; two-part tariffs; vertical pricing (search for similar items in EconPapers)
JEL-codes: C C7 C70 C71 C72 C73 (search for similar items in EconPapers)
Date: 2023
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