Supplier Fixed Costs and Retail Market Monopolization
Vanessa von Schlippenbach and
Christian Wey ()
No 1408, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research
Considering a vertical structure with perfectly competitive upstream firms that deliver a homogenous good to a differentiated retail duopoly, we show that upstream fixed costs may help to monopolize the downstream market. We find that downstream prices increase in upstream firms’ fixed costs when both intra- and interbrand competition exist. Our findings contradict the common wisdom that fixed costs do not affect market outcomes.
Keywords: Fixed costs; vertical contracting; monopolization (search for similar items in EconPapers)
JEL-codes: L13 L14 L42 (search for similar items in EconPapers)
Pages: 22 p.
New Economics Papers: this item is included in nep-bec, nep-com and nep-ind
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Working Paper: Supplier Fixed costs and Retail Market Monopolization (2014)
Working Paper: Supplier fixed costs and retail market monopolization (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:diw:diwwpp:dp1408
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