Complementary inputs, outsourcing and vertical integration: Price versus quantity competition

Mukherjee, Arijit; Senalp, Burcu

Abstract

We compare the effects of price and quantity competition in an industry with complementary inputs, outsourcing and a vertically integrated firm where vertical integration occurs between a final goods producer and a subset of input suppliers. The profit of the integrated firm and the industry profit are higher under Bertrand competition, the profit of the non-integrated firm is higher under Bertrand competition for high product differentiation, and consumer surplus and welfare are higher under Bertrand competition for low product differentiation. Further, no market foreclosure can be the preferred choice of the vertically integrated firm for any degree of product differentiation.

Citation

Mukherjee, A., & Senalp, B. (2024). Complementary inputs, outsourcing and vertical integration: Price versus quantity competition. Manchester School, 92(5), 578-611. https://doi.org/10.1111/manc.12480

• Journal Article Type: Article
• Acceptance Date: Apr 22, 2024
• Online Publication Date: May 18, 2024
• Publication Date: 2024-09
• Deposit Date: Apr 29, 2024
• Publicly Available Date: May 21, 2024
• Journal: Manchester School
• Print ISSN: 1463-6786
• Electronic ISSN: 1467-9957
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 92
• Issue: 5
• Pages: 578-611
• DOI: https://doi.org/10.1111/manc.12480
• Keywords: Bertrand; Complementary inputs; Cournot; Foreclosure; Vertical integration
• Public URL: https://nottingham-repository.worktribe.com/output/34321607
• Publisher URL: https://onlinelibrary.wiley.com/doi/10.1111/manc.12480