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Successive Oligopolies with Differentiated Firms and Endogeneous Entry

41 Pages Posted: 23 Dec 2012  

Markus Reisinger

Frankfurt School of Finance & Management - Economics Department; CESifo (Center for Economic Studies and Ifo Institute)

Monika Schnitzer

University of Munich - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: December 2012

Abstract

We develop a model of successive oligopolies with endogenous entry, allowing for varying degrees of product differentiation and entry costs in both markets. We show that downstream conditions dominate the overall profitability of the two‐tier structure while upstream conditions mainly affect the distribution of profits. We analyze how two‐part tariffs and resale price maintenance shape the endogenous market structure and study their welfare effects. In contrast to previous literature, we find that welfare under linear prices can be larger than under twopart tariffs although the latter avoids double marginalization. This is because linear prices induce more downstream market entry.

Suggested Citation

Reisinger, Markus and Schnitzer, Monika, Successive Oligopolies with Differentiated Firms and Endogeneous Entry (December 2012). The Journal of Industrial Economics, Vol. 60, Issue 4, pp. 537-577, 2012. Available at SSRN: https://ssrn.com/abstract=2193195 or http://dx.doi.org/10.1111/joie.12005

Markus Reisinger (Contact Author)

Frankfurt School of Finance & Management - Economics Department ( email )

Sonnemannstraße 9-11
Frankfurt am Main, 60314
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Monika Schnitzer

University of Munich - Department of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany
+49 89 2180 2217 (Phone)
+49 89 2180 2767 (Fax)

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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