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Author(s):  
Domenico Buccella ◽  
Luciano Fanti

AbstractIn a vertically related duopoly with input price bargaining, this paper re-examines the downstream firms’ profitability under different market competition degrees. It is shown the rather counterintuitive result that downstream firms earn highest profits with semi-collusion, whose level depends on the upstream bargaining structures, the relative parties’ bargaining power, and the parameters measuring the degree of product differentiation in the downstream market. Concerning social welfare, the key result is that policymakers can tolerate some degree of collusion with decentralized bargaining structures; centralized structures advise for a more procompetitive policy.


2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tzong-Ru Lee ◽  
Ku-Ho Lin ◽  
Chang-Hsiung Chen ◽  
Carmen Otero-Neira ◽  
Göran Svensson

PurposeThe purpose of the paper is to test and compare a framework of firms' business sustainability endeavours with internal and external stakeholders in an oriental business context and to verify the validity and reliability of a stakeholder framework through time and across oriental and occidental business contexts.Design/methodology/approachQuantitative approach based on a questionnaire survey in corporate Taiwan with a response rate of 68.5%. Multivariate analysis is undertaken to uncover the measurement properties of a stakeholder framework.FindingsA framework of firms' business sustainability endeavours with internal and external stakeholders appears valid and reliable through time and across occidental and oriental business contexts.Research limitations/implicationsThis study verifies and fortifies a stakeholder framework through time and across business contexts consisting of five stakeholder groups: upstream, the focal firm, downstream, market and societal.Practical implicationsThe framework of firms' business sustainability endeavours provides guidance to firms in their endeavours of business sustainability with internal and external stakeholders.Originality/valueThis study contributes to existing theory and previous studies by validating a stakeholder framework of business sustainability with internal and external stakeholders beyond occidental business context to be also valid and reliable in oriental ones.


2021 ◽  
pp. 232102222110321
Author(s):  
Doriani Lingga ◽  
Damiana Simanjuntak

This paper analyzes the location choice of an upstream monopolist who supplies input to asymmetric duopoly firms in a downstream market. The monopolist is partially private, in that it cares not only about its profit maximization but also about the survival of the downstream firms. Based on the Hotelling model, we find that the monopolist is always attracted to locate closer to the efficient downstream firm. In particular, when the efficiency difference between the two downstream firms is not too high, such that no firm is driven out of the market, the monopolist locates at a distance of 1/6 from the efficient firm in the line segment of unit length. Finally, considering the downstream firms’ survival, we show that the upstream monopolist charges a higher input price on the efficient firm. This study may be relevant to the product differentiation framework, in which firms can benefit from producing goods that are close to the preference of high-type consumers; to the pharmaceutical industry, in which pharmacy companies must cover a broad market segment; or to the policymaking process, in which policymakers may have an incentive to make a policy preferred by a particular group of the society. JEL Classifications: D42, L12, L230


2021 ◽  
Author(s):  
Ramsi Woodcock

------->Antitrust law and policy today are a semi-coherent welter of legal and economic doctrines. Immanent in them, however, is a structure of great simplicity and utility. The concept at the heart of the antitrust laws is the linear supply chain, consisting of an essential input, a downstream market in which competition is harmed through the discriminatory supply of the input to downstream firms, and consumers who pay higher prices for finished products as a result of the discriminatory behavior. Antitrust attacks this problem of the discriminatory supply of inputs in two ways. First, it seeks to prevent any one intelligence from taking control over the input, because absent such centralized control, competition from input suppliers eliminates any attempt at discrimination. Stopping the centralization of control over inputs is not always possible, however, because sometimes centralized control improves the quality of the input, and antitrust follows an implicit rule of “innovation primacy,” which holds that any act that plausibly improves the product likely does more good for consumers than any resulting increase in prices harms them, and so the act must be immune from antitrust scrutiny. ------->Second, antitrust regulates attempts by input controllers to use their power to increase their profits other than by charging what they know to be the highest possible prices for their products given their level of knowledge of consumer willingness to pay. Profits can be increased in this way by only three routes, each of which involves discrimination by the input controller in the supply of inputs to downstream firms. The input controller can discriminate in favor of firms that improve the final product ultimately sold to consumers and so increase consumers’ willingness to pay. The input controller can discriminate in favor of downstream firms that supply the input controller with information about consumer willingness to pay, enabling the input controller better to choose its prices to maximize its profits. And the input controller can discriminate against downstream firms that refuse to give the input controller access to profits that the firms have in turn extracted from consumers. The doctrine of innovation primacy protects discrimination that improves the final product sold to consumers, but not discrimination that facilitates information acquisition or the disciplining of refractory downstream firms. ------->This analysis resolves numerous longstanding conundrums in antitrust, including (1) whether antitrust picks winners (it must), (2) whether picking winners limits consumer sovereignty (impossible, because whenever a firm discriminates in the supply of inputs, the firm picks winners, and antitrust, which does no more than challenge such discrimination, therefore only ever substitutes its judgment for that of firms, never for that of end consumers), (3) whether antitrust should have a monopoly power requirement (it should, but the requirement should apply to the input market and not, as at present, to the downstream market in which competition is harmed), (4) whether firms should be allowed to compete on their own platforms as a general matter (of course they should, unless it is thought that consumers always know better than firms how everything they buy should be made, from start to finish), and (5) how to define the limits of the firm (the boundary of the firm does not end where formal ownership ends, but rather where discrimination in the supply of inputs ends). The analysis also shows why Lorain Journal, Aspen Skiing, Linkline, Trinko, Microsoft, Qualcomm, exclusive dealing, and tying are all the same basic case.


Author(s):  
Kangsik Choi ◽  
Ki-Dong Lee ◽  
Seonyoung Lim

AbstractWe examine that the bilateral supplier affects the incentive contracts that owners of retailers offer their managers, assuming that the manufacturer sets the input price after observing the terms of the incentive contracts offered to management in the downstream market. Thus, we compare the two models: (1) decentralized bargaining between manufacturers and retailers including two-part tariff contract (2) linear input pricing without bargaining. Contrast to previous studies, we find that in equilibrium, the owners of retailers offer delegation contracts to managers for output restriction regardless of competition modes when offering linear input pricing, which implies that owners do not face a prisoners’ dilemma situation and Pareto superior profit is obtained for retailer. Thus, managerial delegation of retailer is not socially desirable due to the output restriction. Furthermore, decentralized bargaining allows to equalize all the equilibrium outcomes in the different delegation structure under both Bertrand and Cournot competition and leads no delegation for the endogenous delegation problem.


2020 ◽  
Vol 29 (3) ◽  
pp. 827-853
Author(s):  
Alexander Galetovic ◽  
Kirti Gupta

Abstract We build an equilibrium royalty stacking model that links the number of standard-essential patent (SEP) holders with the equilibrium quantity, price and cumulative royalty. We show that all observable implications of the theory are inconsistent with the data from the world mobile wireless industry. In this industry, the number of SEP holders grew from 2 in 1994 to 130 in 2013. Royalty stacking theory predicts falling or stagnant output, rising selling prices, and rising or stagnant quality-adjusted prices. By contrast, between 1994 and 2013 worldwide yearly device sales grew 62-fold, at an average rate of 20.1% per year, and both selling and quality-adjusted prices fell fast over time. Controlling for technological generation, the real average selling price of a device fell between -11.4% and -24.8% per year. Similarly, under conservative parametrizations, royalty stacking theory predicts royalty yields, which are more than an order of magnitude larger than the observed average cumulative royalty yield charged by SEP holders in practice, which hovers between 3% and 3.5%. A theory based on Lerner and Tirole’s (2015, J. Political Econ., 123(3), 547–586) within-functionality competition yields observable implications consistent with the observed facts. If all the technologies protected by SEPs have meaningful substitutes that cap the royalty that any SEP holder can charge, then the cumulative royalty is independent of demand parameters in the downstream market and can be as low as the observed average cumulative royalty yield. Moreover, if the product market is competitive and technological progress is fast, then prices follow costs, quality-adjusted prices protractedly fall, and sales grow fast.


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