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Price vs. quantity competition in vertically related markets. Generalization

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  • Rozanova, Olga

Abstract

This paper generalizes the result of Alipranti et al. (2014) regarding the wholesale prices: I prove that upstream firms always charge the wholesale prices above (below) their marginal costs in case of Bertrand (Cournot) competition downstream. Alipranti et al. (2014) demonstrates this result for the case of linear demand functions and monopolist that sells its product to two retailers. I relax the assumption of linear demands, allow for arbitrary number of retailers and for the competition upstream.

Suggested Citation

  • Rozanova, Olga, 2015. "Price vs. quantity competition in vertically related markets. Generalization," Economics Letters, Elsevier, vol. 135(C), pages 92-95.
    • Handle: RePEc:eee:ecolet:v:135:y:2015:i:c:p:92-95
    DOI: 10.1016/j.econlet.2015.08.007
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    References listed on IDEAS

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    1. Leahy, Dermot & Neary, J Peter, 1997. "Public Policy towards R&D in Oligopolistic Industries," American Economic Review, American Economic Association, vol. 87(4), pages 642-662, September.
    2. Alipranti, Maria & Milliou, Chrysovalantou & Petrakis, Emmanuel, 2014. "Price vs. quantity competition in a vertically related market," Economics Letters, Elsevier, vol. 124(1), pages 122-126.
    3. Bonanno, Giacomo & Vickers, John, 1988. "Vertical Separation," Journal of Industrial Economics, Wiley Blackwell, vol. 36(3), pages 257-265, March.
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    Citations

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    Cited by:

    1. Olga Rozanova, 2017. "The possibility to renegotiate the contracts and the equilibrium mode of competition in vertically related markets," Economics Bulletin, AccessEcon, vol. 37(3), pages 1573-1580.
    2. Joachim Heinzel & Simon Hoof, 2020. "Oligopolistic Upstream Competition with Differentiated Inputs," Working Papers CIE 129, Paderborn University, CIE Center for International Economics.
    3. Yusuke Ikuta, 2017. "Linear Supply Function Competition in A Vertically Related Market," International Journal of Economic Policy Studies, Springer, vol. 12(1), pages 1-22, January.
    4. Hong-Ren Din & Chia-Hung Sun, 2023. "Centralized or decentralized bargaining in a vertically-related market with endogenous price/quantity choices," Journal of Economics, Springer, vol. 138(1), pages 73-94, January.

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    More about this item

    Keywords

    Vertical relations; Price competition; Quantity competition;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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