Abstract
Shin and Yoo (2007) showed that under vertical market structure with the downstream market characterized by Cournot competition, it can be welfare-enhancing for the upstream firm to enter the downstream market and discriminate prices against downstream rival firms. This possibly counter-intuitive result arises from reduced double marginalization. This paper shows that Shin and Yoo's (2007) findings may not extend to a setting of horizontally differentiated downstream market. When the downstream market is horizontally differentiated, it may be socially desirable to prohibit price discrimination when the upstream firm enters the downstream market.
| Original language | English |
|---|---|
| Pages (from-to) | 20-50 |
| Number of pages | 31 |
| Journal | Journal of Economic Theory and Econometrics |
| Volume | 20 |
| Issue number | 1 |
| State | Published - Mar 2009 |
Keywords
- Horizontal differentiation
- Market entry
- Price discrimination
- Vertical market structure