Access to Bottleneck Inputs under Oligopoly: a Prisoners Dilemma?
Duarte Brito and
No 16, Working Papers from Portuguese Competition Authority
In this article, we analyze the incentives of vertically integrated oligopolists to concede access to their bottleneck inputs to an entrant in the downstream retail market. We develop a two-stage model, where in the first stage a downstream entrant negotiates an access price with three vertically integrated incumbents, and in stage 2 firms compete on Salop's circle. The incumbents may be asymmetrically located on the circle, to reflect differences in consumer shares. For some levels of asymmetry, the incumbents face a prisoners dilemma with respect to conceding access to their bottleneck inputs. Entry by a downstream firm may lead to lower retail prices. However, entry may also lead to higher retail prices for the access provider and for the entrant.
Keywords: Bottleneck Input; Vertical Integration; Oligopoly; Entry (search for similar items in EconPapers)
JEL-codes: L43 L96 (search for similar items in EconPapers)
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Journal Article: Access to Bottleneck Inputs under Oligopoly: A Prisoners’ Dilemma? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pca:wpaper:16
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