A Note to Investigate the Welfare: When the Upstream Firm Enters the Downstream Market

DOI: 10.4236/me.2013.411084   PDF   HTML   XML   2,963 Downloads   4,034 Views  

Abstract

To investigate the changes of welfare and the degree of exploitation in consumer side when the upstream firm enters the downstream market, we construct a quantity competition model to analyze the changes in consumers welfare and the profits of upstream and downstream firms. The main findings of this note are as follows: The markup has a negative effect in consumers surplus and the degree of exploitation will deteriorate when the upstream firm goes into the other market. In addition, the profits in the firm which expands his production scale to downstream will decline when the markup level rises, but with no obvious effect in original downstream firm.

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C. Fu, L. Chou and S. Lin, "A Note to Investigate the Welfare: When the Upstream Firm Enters the Downstream Market," Modern Economy, Vol. 4 No. 11, 2013, pp. 790-793. doi: 10.4236/me.2013.411084.

Conflicts of Interest

The authors declare no conflicts of interest.

References

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[3] P. DeGraba, “Input Market Price Discrimination and the Choice of Technology,” American Economic Review, Vol. 80, No, 5, 1990, pp. 1246-1253.
[4] D. S. Sibley and D. L. Weisman, “Rising Rivals’ Costs: The Entry of an Upstream Monopolist into Downstream Markets,” Information Economics and Policy, Vol. 10, No. 4, 1998, pp. 451-470. http://dx.doi.org/10.1016/S0167-6245(98)00012-2
[5] G. Chemla, “Downstream Competition, Foreclosure and Vertical Integration,” Journal of Economics and Management Strategy, Vol. 12, No. 2, 2003, pp. 261-289.
http://dx.doi.org/10.1162/105864003766754224

  
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