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On the Impact of Input Prices on an Entrant’s Profit Under Multi-Product Competition

Author

Listed:
  • Duarte Brito

    (Universidade Nova de Lisboa
    Center for Advanced Studies in Management and Economics of the Universidade de Évora (CEFAGE-UE))

  • Markos Tselekounis

    (Universidade Nova de Lisboa
    Center for Advanced Studies in Management and Economics of the Universidade de Évora (CEFAGE-UE))

Abstract

We study the impact of input prices on an entrant’s profit when firms are engaged in multi-product competition. We consider a setting with both horizontal and vertical differentiation, in which a vertically integrated firm controls the input that is required for the supply of the high-quality product. We establish the conditions under which the entrant is better off from an increase in the wholesale price of this critical input. This possibility contrasts with the existing literature that, under linear demands, finds a non-positive relationship between the input price and the single-product entrant’s profit.

Suggested Citation

  • Duarte Brito & Markos Tselekounis, 2017. "On the Impact of Input Prices on an Entrant’s Profit Under Multi-Product Competition," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 50(1), pages 105-125, February.
    • Handle: RePEc:kap:revind:v:50:y:2017:i:1:d:10.1007_s11151-016-9531-2
    DOI: 10.1007/s11151-016-9531-2
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Eltges, Fabian & Fourberg, Niklas & Wiewiorra, Lukas, 2022. "From legacy to the future: Incentivising demand migration through access fees," WIK Working Papers 3a, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH, Bad Honnef.
    2. Brito, Duarte & Tselekounis, Markos, 2016. "Access regulation and the entrant's mode of entry under multi-product competition in telecoms," Information Economics and Policy, Elsevier, vol. 37(C), pages 20-33.
    3. Eltges, Fabian & Fourberg, Niklas & Wiewiorra, Lukas, 2021. "Copper to fibre migration: Regulated access fees incentivising migration," WIK Working Papers 3, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH, Bad Honnef.
    4. Vitor Miguel Ribeiro, 2018. "Dark fiber price regulation in the absence of facilities-based competition," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 45(2), pages 243-278, June.
    5. Eltges, Fabian & Fourberg, Niklas & Wiewiorra, Lukas, 2022. "Copper to Fibre Migration: Regulated Access Fees Incentivising Migration," 31st European Regional ITS Conference, Gothenburg 2022: Reining in Digital Platforms? Challenging monopolies, promoting competition and developing regulatory regimes 265623, International Telecommunications Society (ITS).

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    More about this item

    Keywords

    Input prices; Multi-product competition; Vertical differentiation;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L97 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Utilities: General

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