Bertrand Versus Cournot Competition in a Vertical Structure: A Note
University of York
Dresden University of Technology - Faculty of Economics and Business Management
University of Nottingham
The Manchester School, Vol. 80, Issue 5, pp. 545-559, 2012
In a vertical structure with a profit‐maximizing upstream firm, we show that whether the profits in the downstream market are higher under Bertrand competition or under Cournot competition depends on the technology differences among the downstream firms and on the pricing strategy (namely uniform pricing or price discrimination) of the upstream firm. The upstream firm's profit, the profit of the upstream and the downstream firms taken together, and social welfare are always higher under Bertrand competition than under Cournot competition.
Number of Pages in PDF File: 15
Date posted: August 25, 2012