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Price and Quantity Competition in a Differentiated Duopoly with Upstream Suppliers

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  • Mónica Correa‐López

Abstract

This paper analyzes the noncooperative game on the choice of strategic variable to set in duopoly in the presence of an upstream market for the input. For the case of labor input, the analysis shows that if the wage is the result of decentralized firm‐union bargain, a duopoly producing substitutes may choose to compete either in the quantity space or in the price space, depending upon the distribution of bargaining power in the wage negotiation and the union's relative preference over the wage. For the case of input suppliers as profit‐maximizing firms, the paper shows that a vertically differentiated duopoly may prefer to compete either in the quantity space or in a mixed strategy setting where the high‐quality firm plays price and the low‐quality firm plays quantity, depending upon the extent of substitutability, the degree of vertical product differentiation and the distribution of bargaining power in the input price negotiation.

Suggested Citation

  • Mónica Correa‐López, 2007. "Price and Quantity Competition in a Differentiated Duopoly with Upstream Suppliers," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(2), pages 469-505, June.
    • Handle: RePEc:bla:jemstr:v:16:y:2007:i:2:p:469-505
    DOI: 10.1111/j.1530-9134.2007.00146.x
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    Cited by:

    1. Luciano Fanti & Nicola Meccheri, 2016. "Non-Rigid Wages And Merger Profitability Reversal Under Convex Costs And Centralized Unionization," Bulletin of Economic Research, Wiley Blackwell, vol. 68(4), pages 383-395, October.
    2. Nicola Meccheri & Luciano Fanti, 2012. "Managerial Delegation Schemes in a Duopoly with Endogenous Production Costs: A Comparison of Sales and Relative Profit Delegation under Centralised Unionisation," Working Paper series 44_12, Rimini Centre for Economic Analysis.
    3. Luciano Fanti & Nicola Meccheri, 2014. "Capacity choice and welfare under alternative unionisation structures," Discussion Papers 2014/176, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    4. Alberto Iozzi & Tommaso Valletti, 2014. "Vertical Bargaining and Countervailing Power," American Economic Journal: Microeconomics, American Economic Association, vol. 6(3), pages 106-135, August.
    5. Kangsik, Choi, 2011. "Cournot and Bertrand competition with asymmetric costs in a mixed duopoly," MPRA Paper 34100, University Library of Munich, Germany.
    6. Luciano Fanti & Nicola Meccheri, 2013. "Managerial Delegation under Alternative Unionization Structures," LABOUR, CEIS, vol. 27(1), pages 38-57, March.
    7. Kangsik, Choi, 2008. "Cournot-Bertrand competition in a unionized mixed duopoly," MPRA Paper 12787, University Library of Munich, Germany, revised 26 Dec 2008.
    8. Jochen Manegold, 2016. "Stackelberg Competition among Intermediaries in a Differentiated Duopoly with Product Innovation," Working Papers CIE 98, Paderborn University, CIE Center for International Economics.
    9. Luciano Fanti & Nicola Meccheri, 2011. "On Product Differentiation and Profits in Unionized Duopolies," Working Paper series 37_11, Rimini Centre for Economic Analysis.
    10. Symeonidis, George, 2010. "Downstream merger and welfare in a bilateral oligopoly," International Journal of Industrial Organization, Elsevier, vol. 28(3), pages 230-243, May.
    11. Luciano Fanti & Nicola Meccheri, 2012. "Differentiated Duopoly and Horizontal Merger Profitability under Monopoly Central Union and Convex Costs," Working Paper series 05_12, Rimini Centre for Economic Analysis.
    12. Fanti, Luciano & Meccheri, Nicola, 2014. "Profits and competition under alternative technologies in a unionized duopoly with product differentiation," Research in Economics, Elsevier, vol. 68(2), pages 157-168.
    13. Ray-Yun Chang & Yan-Shu Lin & Jin-Li Hu, 2015. "Mixed Competition and Patent Licensing," Australian Economic Papers, Wiley Blackwell, vol. 54(4), pages 229-249, December.
    14. Duarte Brito & Margarida Catalão-Lopes, 2023. "Profit raising entry under mixed behavior," Journal of Economics, Springer, vol. 138(1), pages 51-72, January.
    15. John Gilbert & Onur A. Koska & Reza Oladi, 2020. "Product Quality and Strategic Asymmetry in International Trade," Working Papers in Economics 20/05, University of Canterbury, Department of Economics and Finance.
    16. Nicola Meccheri, 2019. "Biased managers in a vertical structure," Working Paper series 19-12, Rimini Centre for Economic Analysis.
    17. Lee, DongJoon & Choi, Kangsik & Nariu, Tatsuhiko, 2016. "Endogenous Choice of Price or Quantity Contract with Upstream R&D Investment: Linear Pricing and Two-part Tariff Contract with Bargaining," MPRA Paper 72752, University Library of Munich, Germany.
    18. Choi Kangsik & Lee Ki-Dong & Lim Seonyoung, 2020. "Managerial Delegation of Competing Vertical Chains with Vertical Externality," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 20(2), pages 1-18, June.
    19. Luciano Fanti & Nicola Meccheri, 2011. "Do profits always decrease with decreasing product differentiation? A reversal result in a unionized duopoly," Discussion Papers 2011/112, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    20. Yu‐ter Wang, 2008. "Product Differentiation: An Alternative To Cvds," South African Journal of Economics, Economic Society of South Africa, vol. 76(3), pages 513-517, September.
    21. Chongfeng Lan & Zhongzhen Miao & Huanyong Ji, 2021. "Strategic Analysis of Dual-Channel Green Supply Chain with an Unreliable and Competitive Supplier," Sustainability, MDPI, vol. 13(10), pages 1-22, May.
    22. Choi, Kangsik, 2008. "Comparing Cournot and Bertrand Competition in a Unionized Mixed Duopoly," MPRA Paper 15468, University Library of Munich, Germany, revised 27 May 2009.
    23. Kangsik, Choi, 2012. "Cournot and Bertrand competition with asymmetric costs in a mixed duopoly revisited," MPRA Paper 37704, University Library of Munich, Germany, revised 28 Mar 2012.

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