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Market Analysis in the Presence of Indirect Constraints and Captive Sales

Author

Listed:
  • Roman Inderst

    (London School of Economics & Political Science)

  • Tommaso Valletti

    (Imperial College London, University of Rome "Tor Vergata" and CEPR)

Abstract

This paper analyzes merchant markets in the presence of vertically-integrated firms. We discuss when vertical integration tends to increase the elasticity of (derived) demand in the merchant market because of indirect contraints arising from the retail market. We also discuss the relevance of different measures of market power such as market shares in the wholesale or retail market. We provide insights into the likely effect of an upstream merger under vertical integration, depending on, for instance, whether the integrated firm currently sells into the merchant market or whether this can be expected after the merger.

Suggested Citation

  • Roman Inderst & Tommaso Valletti, 2006. "Market Analysis in the Presence of Indirect Constraints and Captive Sales," CEIS Research Paper 74, Tor Vergata University, CEIS.
    • Handle: RePEc:rtv:ceisrp:74
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    File URL: https://ceistorvergata.it/RePEc/rpaper/No-74.pdf
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    References listed on IDEAS

    as
    1. Eric Avenel & Corinne Barlet, 2000. "Vertical Foreclosure, Technological Choice, and Entry on the Intermediate Market," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 211-230, June.
    2. 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.
    3. Richard S. Higgins, 1999. "Competitive vertical foreclosure," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 20(4), pages 229-237.
    4. Roman Inderst & Tommaso M. Valletti, 2007. "Market Analysis In The Presence Of Indirect Constraints And Captive Sales," Journal of Competition Law and Economics, Oxford University Press, vol. 3(2), pages 203-231.
    5. Géarard Gaudet & Ngo Van Long, 1996. "Vertical Integration, Foreclosure, and profits in the Presence of Double Marginalization," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(3), pages 409-432, September.
    6. Alexander Schrader & Stephen Martin, 1998. "Vertical Market Participation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 13(3), pages 321-331, June.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Christos Constantatos & Ioannis Pinopoulos, 2013. "Accommodation effects in successive Cournot Oligopolies," Discussion Paper Series 2013_06, Department of Economics, University of Macedonia, revised Dec 2013.
    2. Inderst, Roman, 2010. "Models of vertical market relations," International Journal of Industrial Organization, Elsevier, vol. 28(4), pages 341-344, July.
    3. Ioannis N. Pinopoulos, 2014. "Equilibrium downstream mark-up and upstream free entry," Discussion Paper Series 2014_02, Department of Economics, University of Macedonia, revised Sep 2014.
    4. Ioannis Pinopoulos, 2014. "Downstream Market Power and the Lerner Index," Discussion Paper Series 2014_07, Department of Economics, University of Macedonia, revised Nov 2014.
    5. Christos Constantatos & Ioannis N. Pinopoulos, 2021. "On the choice of contract types in vertical relations," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(3), pages 531-538, April.
    6. Manh Cuong Nguyen & Viet Anh Dang & Tri Tri Nguyen, 2023. "The transfer of risk taking along the supply chain," Review of Quantitative Finance and Accounting, Springer, vol. 61(4), pages 1341-1378, November.
    7. Ioannis N. Pinopoulos, 2011. "Input foreclosure under alternative entry conditions in the upstream market," Discussion Paper Series 2011_15, Department of Economics, University of Macedonia, revised Nov 2011.
    8. Köhler, Christian & Rammer, Christian, 2012. "Buyer power and suppliers' incentives to innovate," ZEW Discussion Papers 12-058, ZEW - Leibniz Centre for European Economic Research.
    9. Mélisande Cardona & Anton Schwarz & B. Yurtoglu & Christine Zulehner, 2009. "Demand estimation and market definition for broadband Internet services," Journal of Regulatory Economics, Springer, vol. 35(1), pages 70-95, February.
    10. Roman Inderst & Tommaso M. Valletti, 2007. "Market Analysis In The Presence Of Indirect Constraints And Captive Sales," Journal of Competition Law and Economics, Oxford University Press, vol. 3(2), pages 203-231.
    11. Erotokritos Varelas, 2014. "Bank structure and public debt," Discussion Paper Series 2014_06, Department of Economics, University of Macedonia, revised Sep 2014.
    12. Hou, Liyang & Valcke, Peggy & Stevens, David, 2013. "Can open internet access be imposed upon European CATV networks?," Telecommunications Policy, Elsevier, vol. 37(10), pages 970-980.

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    More about this item

    Keywords

    market definition; wholesale; SSNIP; vertical integration;
    All these keywords.

    JEL classification:

    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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