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A Model of Vertical Oligopolistic Competition

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  • Reisinger, Markus
  • Schnitzer, Monika E

Abstract

This paper develops a model of successive oligopolies with endogenous market entry, allowing for varying degrees of product differentiation and entry costs in both markets. Our analysis shows that the downstream conditions dominate the overall profitability of the two-tier structure while the upstream conditions mainly affect the distribution of profits. We compare the welfare effects of upstream versus downstream deregulation policies and show that the impact of deregulation may be overvalued when ignoring feedback effects from the other market. Furthermore, we analyze how different forms of vertical restraints influence the endogenous market structure and provide conditions under which they are welfare enhancing.

Suggested Citation

  • Reisinger, Markus & Schnitzer, Monika E, 2008. "A Model of Vertical Oligopolistic Competition," Department of Economics, Working Paper Series qt3n9000fg, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    • Handle: RePEc:cdl:econwp:qt3n9000fg
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    References listed on IDEAS

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    2. Dewenter, Ralf & Haucap, Justus & Wenzel, Tobias, 2009. "Indirect network effects with two salop circles: the example of the music industry," FAU Discussion Papers in Economics 09/2009, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.

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    More about this item

    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
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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