Supplier Fixed Costs and Retail Market Monopolization

Considering a vertical structure with perfectly competitive upstream firms that deliver a homogenous good to a differentiated retail duopoly, we show that upstream fixed costs may help to monopolize the downstream market. We find that downstream prices increase in upstream firms' fixed costs when both intra- and interbrand competition exist. Our findings contradict the common wisdom that fixed costs do not affect market outcomes.

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Year of publication:	2014
Authors:	Caprice, Stéphane ; Schlippenbach, Vanessa von ; Wey, Christian
Institutions:	DIW Berlin (Deutsches Institut für Wirtschaftsforschung)
Subject:	Fixed costs \| vertical contracting \| monopolization

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Extent:	application/pdf
Series:	Discussion Papers of DIW Berlin. - ISSN 1619-4535.
Type of publication:	Book / Working Paper
Notes:	Number 1408 22 pages long
Classification:	L13 - Oligopoly and Other Imperfect Markets ; L14 - Transactional Relationships; Contracts and Reputation; Networks ; L42 - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010891249