Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

A Member of the Law Professor Blogs Network

Friday, October 9, 2009

Optional linear input prices in vertical relations

Posted by D. Daniel Sokol

Claudia Salim (Free University of Berlin - Econ) writes on Optional linear input prices in vertical relations.

ABSTRACT: This paper examines how the option of a regulated linear input price affects vertical contracting, where a monopolistic upstream supplier sequentially offers supply contracts to two symmetric downstream firms. We find that equilibrium contracts vary with production cost and regulated price level: If the regulated price is not too high, the option allows for price discrimination, but prevents foreclosure in the intermediary market. Indeed, if both cost and optional price are rather low, non-discriminatory input prices below cost may arise. Optional input prices are socially more desirable than a flat ban on price discrimination, as consumers benefit from more intense downstream competition.

http://lawprofessors.typepad.com/antitrustprof_blog/2009/10/optional-linear-input-prices-in-vertical-relations-.html

| Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef0120a613514b970c

Listed below are links to weblogs that reference Optional linear input prices in vertical relations :

Comments

Post a comment