Price Versus Quantity Competition in a Vertically Related Market with Retailer’s Effort
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Qian Liu
Abstract
Allowing downstream retailers to engage in demand-enhancing investment, this paper demonstrates that the classical conclusions regarding the comparison of Cournot and Bertrand competition in a vertically related market with decentralized bargaining are completely reversed. It shows that Bertrand competition is more efficient than Cournot competition, in the sense that both consumer surplus and social welfare are always higher in the former.
Funding source: Guangdong Province Soft Science Research Project
Award Identifier / Grant number: 2019A101002056
Acknowledgments
We are very grateful to the editor, Ronald Peeters and the two anonymous reviewers for their insightful remarks and constructive suggestions. Qian Liu gratefully acknowledges the financial support of the Guangdong Province Soft Science Research Project (2019A101002056).
We provide more detailed proofs of the propositions in this paper. Note that the following analyses are performed on the basis of Assumption 1, i.e.,
A-1: Proof of Proposition 1
A-2: Proof of Proposition 2
where
A-3: Proof of Proposition 3
where
A-4: Proof of Proposition 4
where
Combining the parameter range assumed by Assumption 1, we can find that the sigh of above expression mainly depends on the degree of product differentiation, i.e.,
A-5: Proof of Proposition 5
where
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Articles in the same Issue
- Frontmatter
- Research Articles
- On the Microfoundation of Linear Oligopoly Demand
- Uncertain Outcomes and Climate Change Policy Using an Expo-Power Utility Function
- Price Versus Quantity Competition in a Vertically Related Market with Retailer’s Effort
- Search Costs and Wage Inequality
- Product Differentiation in a Vertical Structure
- Corporate Profit Tax and Strategic Corporate Social Responsibility Under Foreign Acquisition
- Examining the Impact of Electoral Competition and Endogenous Lobby Formation on Equilibrium Policy Platforms
- Entry Deterrence and Free Riding in License Auctions: Incumbent Heterogeneity and Monotonicity
- When is Knowledge Acquisition Socially Beneficial in the Laffont–Tirole Regulatory Framework?
- Notes
- Long-Run Growth, Speed of Convergence and the Specification of Technology
- Working Time under Alternative Pay Contracts in the Ride-Sharing Industry
- Tacit Collusion with Consumer Preference Costs
- Competitively-Issued Convertible Bank Notes in a Theory of Finance: Earl Thompson Meets Fischer Black
Articles in the same Issue
- Frontmatter
- Research Articles
- On the Microfoundation of Linear Oligopoly Demand
- Uncertain Outcomes and Climate Change Policy Using an Expo-Power Utility Function
- Price Versus Quantity Competition in a Vertically Related Market with Retailer’s Effort
- Search Costs and Wage Inequality
- Product Differentiation in a Vertical Structure
- Corporate Profit Tax and Strategic Corporate Social Responsibility Under Foreign Acquisition
- Examining the Impact of Electoral Competition and Endogenous Lobby Formation on Equilibrium Policy Platforms
- Entry Deterrence and Free Riding in License Auctions: Incumbent Heterogeneity and Monotonicity
- When is Knowledge Acquisition Socially Beneficial in the Laffont–Tirole Regulatory Framework?
- Notes
- Long-Run Growth, Speed of Convergence and the Specification of Technology
- Working Time under Alternative Pay Contracts in the Ride-Sharing Industry
- Tacit Collusion with Consumer Preference Costs
- Competitively-Issued Convertible Bank Notes in a Theory of Finance: Earl Thompson Meets Fischer Black
