Oligopoly Intermediation, Relative Rivalry, and market conduct

Hamilton, Stephen F., Bontems, Philippe and Lepore, Jason (2015) Oligopoly Intermediation, Relative Rivalry, and market conduct. International Journal of Industrial Organization, vol.40. pp. 49-59.

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Official URL: http://tse-fr.eu/pub/29285

Abstract

We consider two firms that compete against each other jointly in upstreamand downstream markets under two pricing games: Purchasing to stock (PTS), in which firms select input prices prior to setting consumer prices; and purchasing to order (PTO), in which firms sell forward contracts to consumers prior to selecting input prices. The antitrust implications of the model depend on the relative degree of oligopoly rivalry in the upstream and downstream markets. Firms strategically precommit to setting prices in the less rivalrous market,which serves to soften competition in the more rivalrous market, resulting in anticompetitive effects. Bertrand prices emerge in equilibrium when the markets are equally rivalrous, while Cournot outcomes arise with upstream monopsony or downstream monopoly markets. The slope of firm reaction functions depends on relative rivalry, a feature we use to derive testable hypotheses for antitrust analysis of a wide variety of industry practices.

Item Type: Article
Language: English
Date: May 2015
Refereed: Yes
Uncontrolled Keywords: Oligopoly, Intermediation, Strategic Pre-commitment, Policy
JEL codes: F13 - Commercial Policy; Protection; Promotion; Trade Negotiations; International Trade Organizations
L13 - Oligopoly and Other Imperfect Markets
L22 - Firm Organization and Market Structure - Markets vs. Hierarchies; Vertical Integration; Conglomerates; Subsidiaries
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 21 Sep 2015 13:08
Last Modified: 09 Apr 2018 13:22
OAI ID: oai:tse-fr.eu:29285
URI: http://publications.ut-capitole.fr/id/eprint/16896

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