Upstream incentives to encourage downstream competition in a vertically separated industry

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Title: Upstream incentives to encourage downstream competition in a vertically separated industry
Authors: Sandonís Díez, Joel | López-Cuñat, Javier M.
Research Group/s: Microeconomía Aplicada (GIMA)
Center, Department or Service: Universidad de Alicante. Departamento de Fundamentos del Análisis Económico
Keywords: Dominant upstream firm | Downstream competition | Wholesale price | Two-part tariff contracts
Knowledge Area: Fundamentos del Análisis Económico
Issue Date: 2018
Publisher: World Scientific Publishing
Citation: The Singapore Economic Review. 2018, 63(3): 619-627. doi:10.1142/S0217590815500903
Abstract: We show in this paper that a dominant supplier, under observable two-part tariff contracts and an alternative, less efficient supply of the input, could benefit from more intense competition downstream provided that it has strong enough market power upstream. This implies that the incentives of upstream suppliers to foreclose downstream firms are less important than the previous literature had suggested. In fact, we find that the result also holds under observable linear contracts when we consider free entry in the downstream market.
Sponsor: Support from Ministerio de Economía y Competitividad under Project ECO2012-34928, Generalitat Valenciana under Grant PROMETEO/2013/037 and the IVIE are gratefully acknowledged.
ISSN: 0217-5908 (Print) | 1793-6837 (Online)
DOI: 10.1142/S0217590815500903
Language: eng
Type: info:eu-repo/semantics/article
Rights: © World Scientific Publishing Company
Peer Review: si
Publisher version:
Appears in Collections:INV - GIMA - Artículos de Revistas

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