In a two-tier industry with bottleneck upstream and two downstream firms producing vertically differentiated goods, we identify conditions under which the upstream supplier chooses exclusive or non-exclusive negotiations, or an English auction to sell its essential input. Auctioning off a two-part tariff contract is optimal for the supplier when its bargaining power is low and the final goods are not too differentiated. Otherwise, the supplier enters into exclusive or non-exclusive negotiations with the downstream firm(s). Finally, in contrast to previous findings, an auction is never welfare superior to negotiations
Auctions vs. negotiations in vertically related markets / Bacchiega, Emanuele; Bonroy, Olivier; Petrakis, Emmanuel. - In: ECONOMICS LETTERS. - ISSN 0165-1765. - ELETTRONICO. - 192:(2020), pp. 109198.1-109198.4. [10.1016/j.econlet.2020.109198]
Auctions vs. negotiations in vertically related markets
Bacchiega, Emanuele;
2020
Abstract
In a two-tier industry with bottleneck upstream and two downstream firms producing vertically differentiated goods, we identify conditions under which the upstream supplier chooses exclusive or non-exclusive negotiations, or an English auction to sell its essential input. Auctioning off a two-part tariff contract is optimal for the supplier when its bargaining power is low and the final goods are not too differentiated. Otherwise, the supplier enters into exclusive or non-exclusive negotiations with the downstream firm(s). Finally, in contrast to previous findings, an auction is never welfare superior to negotiationsFile | Dimensione | Formato | |
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