Upstream Competition between Vertically Integrated Firms

37 Pages Posted: 20 Dec 2011  

Marc Bourreau

Telecom ParisTech; CREST

Date Written: December 2011

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.

Suggested Citation

Bourreau, Marc, Upstream Competition between Vertically Integrated Firms (December 2011). Available at SSRN: https://ssrn.com/abstract=1974820 or http://dx.doi.org/10.1111/j.1467-6451.2011.00469.x

Marc Bourreau (Contact Author)

Telecom ParisTech ( email )

46, rue Barrault
Paris Cedex 13, F-75634
France

CREST

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

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