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Supplier Fixed Costs and Retail Market Monopolization

Discussion Papers 1408, 22 S.

Stéphane Caprice, Vanessa von Schlippenbach, Christian Wey

2014

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Abstract

Considering a vertical structure with perfectly competitive upstream firms that deliver a homogenous good to a differentiated retail duopoly, we show that upstream fixed costs may help to monopolize the downstream market. We find that downstream prices increase in upstream firms’ fixed costs when both intra- and interbrand competition exist. Our findings contradict the common wisdom that fixed costs do not affect market outcomes.



JEL-Classification: L13;L14;L42
Keywords: Fixed costs, vertical contracting, monopolization
Frei zugängliche Version: (econstor)
http://hdl.handle.net/10419/103371

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