Monday, October 27, 2014

Supplier Fixed Costs and Retail Market Monopolization

Stephane Caprice, Toulouse School of Economics, Vanessa von Schlippenbach, DIW and Christian Wey, DICE theorize on Supplier Fixed Costs and Retail Market Monopolization.

ABSTRACT: 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.

https://lawprofessors.typepad.com/antitrustprof_blog/2014/10/supplier-fixed-costs-and-retail-market-monopolization-.html

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