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Endogenous choice of price or quantity contract and the implications of two-part-tariff in a vertical structure

Basak, Debasmita; Wang, Leonard F.S.

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Authors

Leonard F.S. Wang



Abstract

We re-investigate the endogenous choice of price (Bertrand) and quantity (Cournot) contract in the presence of a vertically related upstream market for input. We find that choosing price contract is the dominant strategy for downstream firms when the two-part-tariff pricing contract is determined through centralised Nash bargaining. We further show that the level of social welfare is the same regardless of the mode of product market competition (i.e., Bertrand or Cournot).

Citation

Basak, D., & Wang, L. F. (2016). Endogenous choice of price or quantity contract and the implications of two-part-tariff in a vertical structure. Economics Letters, 138, https://doi.org/10.1016/j.econlet.2015.11.026

Journal Article Type Article
Acceptance Date Nov 25, 2015
Online Publication Date Dec 3, 2015
Publication Date Jan 30, 2016
Deposit Date May 31, 2018
Publicly Available Date May 31, 2018
Journal Economics Letters
Print ISSN 0165-1765
Electronic ISSN 1873-7374
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 138
DOI https://doi.org/10.1016/j.econlet.2015.11.026
Keywords Bargaining; Bertrand; Cournot; Two-part tariffs; Vertical pricing; Welfare
Public URL https://nottingham-repository.worktribe.com/output/771274
Publisher URL https://www.sciencedirect.com/science/article/pii/S0165176515004929
Contract Date May 31, 2018

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