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Product differentiation in successive vertical oligopolies
Author(s) -
Belleflamme Paul,
Toulemonde Eric
Publication year - 2003
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/1540-5982.t01-2-00001
Subject(s) - variety (cybernetics) , product differentiation , oligopoly , upstream (networking) , downstream (manufacturing) , competition (biology) , product (mathematics) , industrial organization , microeconomics , duopoly , production (economics) , economics , business , cournot competition , computer science , marketing , mathematics , telecommunications , ecology , biology , geometry , artificial intelligence
. This is a successive oligopoly model with two varieties of a final product. Downstream firms choose one variety to sell on a final market. Upstream firms specialize in the production of one input specifically designed for one variety, but they also produce the input for the other variety at an extra cost. We show that as more downstream firms choose one particular variety, more upstream firms specialize in the input specific to that variety, and vice‐versa. Multiple equilibria may result, and the softening effect of product differentiation on competition might not be strong enough to induce maximal differentiation. JEL Classification: L11, L13, L23