Input Price Discrimination and Upstream R&amp;D Investments

Pinopoulos, Ioannis N.

doi:10.1007/s11151-019-09713-6

Cited by 16 publications

(6 citation statements)

References 25 publications

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“…In this paper, different from Chen et al (2021), we consider input price discrimination, forward and backward cross‐ownership, and analyze the impact of vertical cross‐ownership with input price discrimination in a vertically related market on industry profit, consumer surplus, and social welfare. The inclusion of bargaining process complexes the analysis but makes our framework more realistic and relevant (Buccella & Fanti, 2021; Pinopoulos, 2019, 2021; Wang & Li, 2020). Common belief is that common ownership is more likely to improve welfare when there are fewer downstream firms and a greater degree of product differentiation.…”

Section: Introductionmentioning

confidence: 99%

Vertical cross‐ownership, input price discrimination, and social welfare

Sun

Wang

2022

Int J of Economic Theory

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In this paper, we analyze the impact of vertical cross‐ownership with input price discrimination on social welfare. A higher degree of product differentiation will raise industry profit, consumer surplus, and social welfare; under forward cross‐ownership, a higher degree of cross‐ownership has the same effect, in addition, it will reduce rival firm's profit and increase upstream firm's profit; however, under backward cross‐ownership, a higher degree of cross‐ownership has an opposite effect. Furthermore, under Cournot and Bertrand competition, forward cross‐ownership will incentivize downstream firms to produce more via a lower input price, achieving the above effect.

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Section: Introductionmentioning

confidence: 99%

Vertical cross‐ownership, input price discrimination, and social welfare

Sun

Wang

2022

Int J of Economic Theory

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“…Our analysis also closely relates to the literature on input price discrimination with cost-reducing R&D (e.g., Akgün & Chioveanu, 2019;Herweg & Müller, 2014;Inderst & Valletti, 2009;Pinopoulos, 2020) in the sense that we consider a dynamic model. DeGraba (1990) shows input price discrimination weakens the investment incentive for a firm due to the higher wholesale price charged to efficient firms.…”

Section: Introductionmentioning

confidence: 91%

Input price discrimination and strategic inventory

Matsuoka

2023

The Manchester School

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We consider a two-period model with strategic inventory and explore the welfare implications of banning input price discrimination. We find that inventory incentive is stronger under input price discrimination. Under uniform pricing, an increase in an inventory of a firm equally lowers the rival's wholesale price. It expands the rival's production, suppresses the firm's output, and weakens the incen tive.We also find that the weak incentive leads to higher quantity-weighted average wholesale and retail prices.Therefore, allowing input price discrimination alleviates double marginalization and leads to higher consumer surplus and social welfare.

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“…Yet, passive expectations are fulfilled in equilibrium. There are many papers related [example, see McAfee and Schwartz (1994), Belleflamme and Peitz (2019), Gaudin (2019), Pinopoulos (2019, 2020a, 2020b].…”

Section: Literature Reviewmentioning

confidence: 99%

Observable Versus Unobservable Contracts in Duopolistic Competition

Munte

Kawulur²

2022

JICP

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One upstream and two downstream firms are involved in a vertically related industry. Under observable contracts, firms are aware of both their own and their rival's input prices. However, under an unobservable contract, firms only know their own input price and are unaware of their rival’s input price. We demonstrate both vertical separation and vertical integration in the two contracts. We focus on two methods: linear tariffs and two-part tariffs. With linear tariffs and asymmetric costs under both observable contracts and unobservable contracts, vertical integration increases consumer surplus and social welfare. With separation linear tariffs and asymmetric costs, consumer surplus (social welfare) is lower (higher) under observable contracts than under unobservable contracts. With two-part tariffs, vertical integration does not affect (decreases) both consumer surplus and social welfare under observable contracts (under unobservable contracts). Under separation two-part tariffs, consumer surplus and social welfare are lower under observable two-part tariffs than under unobservable ones.

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Input Price Discrimination and Upstream R&D Investments

Cited by 16 publications

References 25 publications

Vertical cross‐ownership, input price discrimination, and social welfare

Vertical cross‐ownership, input price discrimination, and social welfare

Input price discrimination and strategic inventory

Observable Versus Unobservable Contracts in Duopolistic Competition

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