Accommodation effects with downstream Cournot competition

Christos Constantatos and Ioannis Pinopoulos

Managerial and Decision Economics, 2019, vol. 40, issue 1, 119-124

Abstract: In a two‐tier industry where a vertically integrated firm sells input to and competes against a downstream rival, we show that, when the upstream division of the integrated firm chooses its input quantity, the downstream division credibly accommodates rival sales despite downstream competition being Cournot. Even taking rival quantity as given, the downstream division knows that, by limiting its own final‐good quantity, it can increase rival revenue, and therefore willingness‐to‐pay for the input. Upstream price setting leaves no room for downstream accommodating behavior implying that for a vertically integrated input monopolist, setting input price or input quantity makes crucial difference.

Date: 2019
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/mde.2987

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: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:40:y:2019:i:1:p:119-124

Access Statistics for this article

Managerial and Decision Economics is currently edited by Antony Dnes

More articles in Managerial and Decision Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().