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Supplier Fixed Costs and Retail Market Monopolization

Stephane Caprice, Vanessa von Schlippenbach and Christian Wey ()

No 1408, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: 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.
Date: 2014
New Economics Papers: this item is included in nep-bec, nep-com and nep-ind
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