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Price vs. quantity competition in a vertically related market revisited

Basak, Debasmita; Mukherjee, Arijit

Authors

ARIJIT MUKHERJEE Arijit.Mukherjee@nottingham.ac.uk
Professor of Industrial Economics



Abstract

In a recent paper, Alipranti et al. (2014, Price vs. quantity competition in a vertically related market, Economics Letters, 124: 122-126) show that, in a vertically related market, Cournot competition yields higher social welfare than Bertrand competition if the upstream firm subsidises the downstream firm’s production via negative wholesale input prices. However, the assumption of a negative input price is not economically viable as it encourages the downstream firms to buy an unbounded amount of inputs. We show that the welfare ranking is reversed once we introduce a non-negativity constraint on the input prices

Citation

Basak, D., & Mukherjee, A. (2017). Price vs. quantity competition in a vertically related market revisited. Economics Letters, 153, https://doi.org/10.1016/j.econlet.2017.01.021

Journal Article Type Article
Acceptance Date Jan 20, 2017
Online Publication Date Jan 25, 2017
Publication Date Apr 30, 2017
Deposit Date Feb 9, 2017
Publicly Available Date Mar 28, 2024
Journal Economics Letters
Print ISSN 0165-1765
Electronic ISSN 0165-1765
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 153
DOI https://doi.org/10.1016/j.econlet.2017.01.021
Keywords Bargaining; Bertrand; Cournot; Two-part tariffs; Vertical pricing; Welfare
Public URL https://nottingham-repository.worktribe.com/output/857984
Publisher URL http://www.sciencedirect.com/science/article/pii/S0165176517300320

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