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Incentive to encourage downstream competition under bilateral oligopoly

Author

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  • Stephane Caprice

    (INRA-ESR Toulouse and University of Warwick)

Abstract

Consider the contracting problem of an input supplier dealing with several firms that compete in an output market. We show that, contrary to the key result of the previous literature, an input supplier's profit can increase with the number of downstream firms if the upstream firm is not a monopolist but instead competes with an alternative inferior supplier.

Suggested Citation

  • Stephane Caprice, 2005. "Incentive to encourage downstream competition under bilateral oligopoly," Economics Bulletin, AccessEcon, vol. 12(9), pages 1-5.
    • Handle: RePEc:ebl:ecbull:eb-05l00001
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    File URL: http://www.accessecon.com/pubs/EB/2005/Volume12/EB-05L00001A.pdf
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    References listed on IDEAS

    as
    1. McAfee, R. Preston & Schwartz, Marius, 1995. "The non-existence of pairwise-proof equilibrium," Economics Letters, Elsevier, vol. 49(3), pages 251-259, September.
    2. Gilles Chemla, 2003. "Downstream Competition, Foreclosure, and Vertical Integration," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(2), pages 261-289, June.
    3. G. Chemla, 1999. "Downstream competition, foreclosure, and vertical integration," THEMA Working Papers 99-18, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    4. McAfee, R Preston & Schwartz, Marius, 1994. "Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity," American Economic Review, American Economic Association, vol. 84(1), pages 210-230, March.
    5. repec:dau:papers:123456789/6313 is not listed on IDEAS
    6. Ilya Segal & Michael D. Whinston, 2003. "Robust Predictions for Bilateral Contracting with Externalities," Econometrica, Econometric Society, vol. 71(3), pages 757-791, May.
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    Cited by:

    1. Ramon Faulí‐Oller & Joel Sandonís & Juana Santamaría, 2011. "Downstream Mergers And Upstream Investment," Manchester School, University of Manchester, vol. 79(4), pages 884-898, July.
    2. repec:ebl:ecbull:v:12:y:2008:i:3:p:1-7 is not listed on IDEAS
    3. Joel Sandonís & Javier M. López-Cuñat, 2018. "Upstream Incentives To Encourage Downstream Competition In A Vertically Separated Industry," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 63(03), pages 619-627, June.
    4. Ramon Fauli-Oller & Lluis Bru, 2008. "Horizontal mergers for buyer power," Economics Bulletin, AccessEcon, vol. 12(3), pages 1-7.
    5. Ramon Fauli-Oller & Joel Sandonis, 2016. "Welfare Effects Of Downstream Mergers And Upstream Market Concentration," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 61(05), pages 1-16, December.
    6. Ramón Faulí-Oller & Joel Sandonís, 2007. "Downstream Mergers And Entry," Working Papers. Serie AD 2007-21, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    7. Yamada, Mai, 2016. "The Optimal Trading Partner for an Upstream Monopolist," MPRA Paper 70325, University Library of Munich, Germany.

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    More about this item

    Keywords

    bilateral oligopoly;

    JEL classification:

    • L0 - Industrial Organization - - General
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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