Hamilton, Stephen F., Bontems, Philippe and Lepore, Jason (2013) Oligopoly Intermediation, Relative Rivalry, and the Mode of Competition. TSE Working Paper, n. 13-466

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Policy design in oligopolistic settings depends critically on the mode of competition between firms. We develop a model of oligopoly intermediation that reveals the mode of competition to be an equilibrium outcome that depends on the relative degree of rivalry between firms in the upstream and downstream markets. We examine two forms of sequential 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 equilibrium outcomes of the model range between Bertrand and Cournot depending on the relative degree of rivarly between firms in the upstream and downstream markets. Prices are strategic complements and the equilibrium prices coincide with the Bertrand outcome when the markets are equally rivalrous, while prices are strategic substitutes when the degree of rivalry is sufficiently high in one market relative to the other. Cournot outcomes emerge under circumstances in which prices are strategically independent in either the upstream or downstream market. We derive testable implications for the mode of competition that depend only on primitive conditions of supply and demand functions.

Item Type: Monograph (Working Paper)
Language: English
Date: 15 October 2013
Uncontrolled Keywords: Oligopoly, Intermediation, Strategic Pre-commitment, Policy
JEL Classification: 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
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 09 Jul 2014 17:41
Last Modified: 02 Apr 2021 15:48
OAI Identifier: oai:tse-fr.eu:27904
URI: https://publications.ut-capitole.fr/id/eprint/15822

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