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On an intermediate goods market with asymmetric production technologies as well as vertical and horizontal product differentiation, we analyze the influence of simultaneous competition for resources and customers. The intermediaries face either price or quantity competition on the output market and a monopolistic, strategically acting supplier on the input market. We find that there exist quality and productivity differences such that for quantity competition only one intermediary is willing to procure inputs from the input supplier, while for price competition both intermediaries are willing to purchase inputs. Moreover, the well-known welfare advantage of price competition can in general be no longer confirmed in our model with an endogenous input market and asymmetric intermediaries.

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The asymmetric dominance effect refers to the phenomenon according to which the choice probability of an alternative increases when an inferior alternative -the decoy -is included into the choice set. The objective of this experimental study is twofold. First, we investigate the asymmetric dominance effect on two-outcome lotteries with almost equal expected values. We find that the impact of a decoy on low-variance lotteries (LVLs) is much higher than on high-variance lotteries (HVLs). Second, we examine the asymmetric dominance effect in the presence of two decoys. While the asymmetric dominance effect persists when the choice set includes two decoys, the effect is not always further enhanced compared to the setting with one decoy and again much stronger for LVLs than for HVLs. Controlling for subjects' degrees of risk aversion, we find support for consistency between individual risk preferences and choice behavior among the lotteries. However, we observe decoy effects of equal strength irrespective of the subjects' degree of risk aversion. Thus, our analysis indicates that to a substantial extent the presence of decoys subtly makes decision-makers choose against their risk preferences by favoring lotteries that entail risks contrary to their elicited individual risk-taking profile.