
Abstract
I develop a model in the spirit of Ordover, Saloner, and Salop (1990), in which two upstream firms compete to supply a homogeneous input to two downstream firms, who compete in prices with differentiated products in a downstream market. Upstream firms are allowed to offer exclusive two-part tariff contracts to the downstream firms. I show that, under very general conditions, this game does not have a subgame-perfect equilibrium in pure strategies. The intuition is that variable parts in such an equilibrium would have to be pairwise-proof. But when variable parts are pairwise-proof, downstream competitive externalities are not internalized, and there exists a profitable deviation. I contrast this non-existence result with earlier papers that found equilibria in similar models.
Item Type: | Paper |
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Faculties: | Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > C5 - Wettbewerbspolitik als Steuerung von Wettbewerbsprozessen |
Subjects: | 300 Social sciences > 330 Economics |
URN: | urn:nbn:de:bvb:19-epub-17398-5 |
Language: | English |
Item ID: | 17398 |
Date Deposited: | 30. Oct 2013, 15:26 |
Last Modified: | 04. Nov 2020, 12:59 |