Downstream rivals’ competition, bargaining, and welfare

Xingtang Wang () and Jie Li ()
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Xingtang Wang: Jinan University
Jie Li: Jinan University

Journal of Economics, 2020, vol. 131, issue 1, No 3, 75 pages

Abstract: Abstract We analyze the effect of downstream competition (or cooperation) in the presence of decentralized bargaining between two downstream firms and an upstream monopolist over a two-part tariff input price. The major findings are as follows: (i) the relationship between the profits of the upstream monopolist (resp. the downstream firms) and the intensity of competition is U-shaped (resp. inverted U-shaped), irrespective of the competition modes in the downstream product market; (ii) if the intensity of competition is sufficiently high, the downstream firms’ profits are higher under Bertrand competition, whereas if the intensity of competition is sufficiently low, the downstream firms’ profits are higher under Cournot competition; and (iii) a market under Cournot competition is more efficient than a market under Bertrand competition, in the sense that both consumer surplus and social welfare are higher in the case of the former.

Keywords: Competition behavior; Vertical structure; Competition mode; Decentralized bargaining (search for similar items in EconPapers)
JEL-codes: D21 L12 L13 L22 L81 M1 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:131:y:2020:i:1:d:10.1007_s00712-018-0644-y

DOI: 10.1007/s00712-018-0644-y

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