Nonlinear Pricing in Vertically Related Duopolies

Download or read book Nonlinear Pricing in Vertically Related Duopolies written by Kai-Uwe Kuhn and published by . This book was released on 1998 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: A vertically separated duopolistic market is analyzed in which manufacturers compete in wholesale price schedules and retailers in quantity. Under certainty there exists a continuum of equilibria. The introduction of an uncertain demand parameter, observed only by retailers, dramatically reduces the set of equilibria. Quantity discounts emerge in markets with only moderately decreasing returns to scale in manufacturing (and quantity competition downstream). With additive shocks to demand the equilibria coincide with those of markets in which vertically integrated firms compete in supply functions before market uncertainty is resolved. However, generically equilibria in my model are not supply function equilibria.