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Supplier Fixed costs and Retail Market Monopolization

Stephane Caprice, Vanessa von Schlippenbach and Christian Wey ()

No 14-524, TSE Working Papers from Toulouse School of Economics (TSE)

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)
Date: 2014-07
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) Downloads
Working Paper: Supplier fixed costs and retail market monopolization (2014) Downloads
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