TITLE:
Competition of Intermediaries in a Differentiated Duopoly
AUTHORS:
Sonja Brangewitz, Jochen Manegold
KEYWORDS:
Input Market, Product Quality, Quantity Competition, Price Competition
JOURNAL NAME:
Theoretical Economics Letters,
Vol.6 No.6,
December
29,
2016
ABSTRACT: 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.