Upstream Competition between Vertically Integrated Firms |
| |
Authors: | Marc Bourreau Johan Hombert Jerome Pouyet Nicolas Schutz |
| |
Affiliation: | 1. ENST and CREST‐LEI, Department of Economics and Social Sciences, , 75634 France;2. HEC, , 78351 Jouy‐en‐Josas, France;3. Paris School of Economics, Ecole Polytechnique and CEPR, , 75014 Paris, France;4. Department of Economics, University of Mannheim, , 68131 Mannheim, Germany |
| |
Abstract: | We propose a model of two‐tier competition between vertically integrated firms and unintegrated downstream firms. We show that, even when integrated firms compete in prices to offer a homogeneous input, the Bertrand logic may collapse, and the input may be priced above marginal cost in equilibrium. These partial foreclosure equilibria are more likely to exist when downstream competition is fierce or when unintegrated downstream competitors are relatively inefficient. We discuss the impact of several regulatory tools on the competitiveness of the wholesale market. |
| |
Keywords: | |
|
|