On the Welfare Effect of Uniform Input Pricing with Endogenous Choices of Channel Structure by Downstream Firms
Pp. 162-197 (36)
X. Henry Wang, Weiwei Wu and Chenhang Zeng
We study a vertical market in which the upstream input market is
monopolized and the downstream is composed of a Cournot oligopoly. The
downstream firms also choose their internal channel structures strategically.
Two main points are made. First, uniform pricing by the monopoly input
supplier leads to higher total welfare than under discriminatory pricing.
Second, uniform pricing is more profitable than price discrimination for the
monopoly input supplier.
Centralized channel, channel structure, Cournot oligopoly,
decentralized channel, downstream firms, input price discrimination,
monopoly input supplier, subgame perfect Nash equilibrium, upstream
input market, vertical market.
Department of Economics, University of Missouri-Columbia, Columbia, MO 65211, USA.