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Competition in successive markets : entry and mergers

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  • GABSZEWICZ, Jean J.
  • ZANAJ, Skerdilajda

Abstract

This paper analyses successive markets where the intra-market linkage depends on the technology used to produce the final output. We investigate entry of new firms, when entry obtains by expanding the economy, as well as collusive agreements between firms. We highlight the differentiated effects of entry corresponding to a constant or decreasing returns technology. In particular, we show that, under decreasing returns, free entry in both markets does not entail the usual tendency for the input price to adjust to its marginal cost while it does under constant returns. Then, we analyse collusive agreements by stressing the role of upstream linkage on the profitability of horizontal mergers A la Salant, Switzer and Reynolds.

Suggested Citation

  • GABSZEWICZ, Jean J. & ZANAJ, Skerdilajda, 2006. "Competition in successive markets : entry and mergers," LIDAM Discussion Papers CORE 2006097, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2006097
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    2. Jean J. Gabszewicz & Skerdilajda Zanaj, 2011. "Free entry in successive oligopolies," International Journal of Economic Theory, The International Society for Economic Theory, vol. 7(2), pages 179-188, June.
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    11. Ivan Dufeu, 2004. "Market size and vertical equilibrium in the context of successive Cournot oligopolies," Post-Print halshs-00068322, HAL.
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    17. Hansen, Terje & Jaskold-Gabszewicz, Jean, 1972. "Collusion of factor owners and distribution of social output," Journal of Economic Theory, Elsevier, vol. 4(1), pages 1-18, February.
    18. Seade, J., 1985. "Profitable Cost Increases and the Shifting of Taxation: Equilibrium Responses of Markets in Oligopoly," Economic Research Papers 269225, University of Warwick - Department of Economics.
    19. Ivan Dufeu, 2004. "Market Size and Vertical Equilibrium in the Context of Successive Cournot Oligopolies [Taille du marché et équilibre vertical dans un contexte d'oligopoles successifs de Cournot]," Post-Print hal-02816481, HAL.
    20. Ordover, Janusz A & Saloner, Garth & Salop, Steven C, 1990. "Equilibrium Vertical Foreclosure," American Economic Review, American Economic Association, vol. 80(1), pages 127-142, March.
    21. Michael A. Salinger, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(2), pages 345-356.
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    Cited by:

    1. Jean Gabszewicz & Didier Laussel & Tanguy Ypersele & Skerdilajda Zanaj, 2013. "Market Games in Successive Oligopolies," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 15(3), pages 397-410, June.
    2. SANIN, Maria Eugenia & ZANAJ, Skerdilajda, 2007. "Environmental innovation under Cournot competition," LIDAM Discussion Papers CORE 2007050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. GABSZEWICZ, Jean J. & ZANAJ, Skerdilajda, 2007. "A note on successive oligopolies and vertical mergers," LIDAM Reprints CORE 2009, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Jebaraj Asirvatham & Sanjib Bhuyan, 2018. "Incentives and Impacts of Vertical Coordination in a Food Production-Marketing Chain: A Non-cooperative Multi-Stage, Multi-Player Analysis," Journal of Industry, Competition and Trade, Springer, vol. 18(1), pages 59-95, March.

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    More about this item

    Keywords

    oligopoly; entry; horizontal collusion; foreclosure;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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