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"Explaining Cross-Supplies" (replaces the old version which did not contain the graphs)

Author

Listed:
  • Pio Baake

    (Humboldt University, Berlin)

  • Jorg Oechssler

    (Humboldt University, Berlin)

  • Christoph Schenk

    (Wissenschaftszentrum Berlin)

Abstract

Cross-supplies describe the phenomenon that two or more firms in the same industry supply each other with their final products. A prominent example is the cooperation in the European flat glass industry, which was recently criticized by the European Commission. In a simple model we try to explain what incentives firms may have to use cross-supplies (instead of producing the goods themselves) and what welfare effects cross-supplies have if they are used. Contrary to the ruling of the European Commission we find that cross-supplies are welfare improving whenever they are employed. Furthermore, for a large range of parameters, they are even benefiting consumers.

Suggested Citation

  • Pio Baake & Jorg Oechssler & Christoph Schenk, 1996. ""Explaining Cross-Supplies" (replaces the old version which did not contain the graphs)," Industrial Organization 9603005, University Library of Munich, Germany, revised 06 Apr 1996.
    • Handle: RePEc:wpa:wuwpio:9603005
    Note: FTP submission, ps-file. JEL numbers: L 13, L 22
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    References listed on IDEAS

    as
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    4. Alexander Schrader & Stephen Martin, 1998. "Vertical Market Participation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 13(3), pages 321-331, June.
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