Wednesday, November 19, 2014
Ioannis N. Pinopoulos (Department of Economics, University of Macedonia, Greece) theorizes on Equilibrium downstream mark-up and upstream free entry.
ABSTRACT: We consider a successive Cournot oligopoly model where firms freely enter into the upstream market. We show that, under specific conditions, a higher number of downstream firms can lead to a higher mark-up in the downstream market. Although downstream market power may increase, consumer prices still decrease with the number of downstream firms implying that higher market power does not necessarily imply lower consumer surplus.