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Profit‐raising Entry in Vertically Related Markets

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  • Leonard F. S. Wang
  • Jen‐yao Lee

Abstract

We extend the standard vertical oligopoly model to allow for free entry in the upstream sector, and research and development with knowledge spillover in the downstream sector. The fact that an increase in the number of firms lowers industry profit is the common wisdom that may not hold in vertical structure of production. We provide a complementary reasoning and find that aggregate downstream profit can increase with downstream entry when the knowledge spillover effect and the entry cost are moderate. Copyright © 2014 John Wiley & Sons, Ltd.

Suggested Citation

  • Leonard F. S. Wang & Jen‐yao Lee, 2015. "Profit‐raising Entry in Vertically Related Markets," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 36(6), pages 401-407, September.
    • Handle: RePEc:wly:mgtdec:v:36:y:2015:i:6:p:401-407
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    1. Seidl, Andrew & Mulungu, Kelvin & Arlaud, Marco & van den Heuvel, Onno & Riva, Massimiliano, 2020. "Finance for nature: A global estimate of public biodiversity investments," Ecosystem Services, Elsevier, vol. 46(C).
    2. Shirazi, Yosef & Carr, Edward & Knapp, Lauren, 2015. "A cost-benefit analysis of alternatively fueled buses with special considerations for V2G technology," Energy Policy, Elsevier, vol. 87(C), pages 591-603.
    3. Shirazi, Elham & Jadid, Shahram, 2017. "Cost reduction and peak shaving through domestic load shifting and DERs," Energy, Elsevier, vol. 124(C), pages 146-159.
    4. Alonso Movilla, Natalia & Zwolinski, Peggy & Dewulf, Jo & Mathieux, Fabrice, 2016. "A method for manual disassembly analysis to support the ecodesign of electronic displays," Resources, Conservation & Recycling, Elsevier, vol. 114(C), pages 42-58.
    5. Duarte Brito & Margarida Catalão-Lopes, 2023. "Profit raising entry under mixed behavior," Journal of Economics, Springer, vol. 138(1), pages 51-72, January.
    6. Tsuyoshi Toshimitsu, 2021. "Note on a profit-raising entry effect in a differentiated Cournot oligopoly market with network compatibility," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 48(2), pages 245-255, June.

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