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Oligopoly intermediation, relative rivalry and market conduct

Author

Listed:
  • Stephen Hamilton

    (CAL POLY - California Polytechnic State University [San Luis Obispo])

  • Philippe Bontems

    (GREMAQ - Groupe de recherche en économie mathématique et quantitative - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique)

  • Jason Lepore

    (CAL POLY - California Polytechnic State University [San Luis Obispo])

Abstract
We consider two firms that compete against each other jointly in upstream and downstream markets under two pricing games: Purchasing to stock (PTS), in which firms select input prices prior to setting consumer prices; and purchasing to order (PTO), in which firms sell forward contracts to consumers prior to selecting input prices. The antitrust implications of the model depend on the relative degree of oligopoly rivalry in the upstream and down- stream markets. Firms strategically precommit to setting prices in the less rivalrous market, which serves to soft- en competition in the more rivalrous market, resulting in anticompetitive effects. Bertrand prices emerge in equilibrium when the markets are equally rivalrous, while Cournot outcomes arise with upstream monopsony or downstream monopoly markets. The slope of firm reaction functions depends on relative rivalry, a feature we use to derive testable hypotheses for antitrust analysis of a wide variety of industry practices.

Suggested Citation

  • Stephen Hamilton & Philippe Bontems & Jason Lepore, 2015. "Oligopoly intermediation, relative rivalry and market conduct," Post-Print hal-01183029, HAL.
  • Handle: RePEc:hal:journl:hal-01183029
    DOI: 10.1016/j.ijindorg.2015.03.002
    as

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    References listed on IDEAS

    as
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    Cited by:

    1. Stephen F. Hamilton & David L. Sunding, 2021. "Joint Oligopsony‐Oligopoly Power in Food Processing Industries: Application to the us Broiler Industry," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(4), pages 1398-1413, August.

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    More about this item

    Keywords

    policy; intermediation; oligopoly; strategic pre-commitment;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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