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Downstream Firms (downstream + firm)
Selected AbstractsBargaining, Bonding, and Partial OwnershipINTERNATIONAL ECONOMIC REVIEW, Issue 3 2000Sudipto Dasgupta This article provides a theory of interfirm partial ownership. We consider a setting in which an upstream firm can make two alternative types of investment: either specific investment that only a particular downstream firm can use or general investment that any downstream firm is capable of using. When the benefits from specific and general investments are both stochastic, equity participation by the downstream firm in the upstream firm can lead to more efficient outcomes than take-or-pay contracts. The optimal ownership stake of the downstream firm is less than 50 percent under a natural assumption about relative bargaining power. [source] Vertical Networks, Integration, and ConnectivityJOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 2 2009Pinar Do This paper studies competition in a network industry with a stylized two layered network structure, and examines: (i) price and connectivity incentives of the upstream networks, and (ii) incentives for vertical integration between an upstream network provider and a downstream firm. The main result of this paper is that vertical integration occurs only if the initial installed-base difference between the upstream networks is sufficiently small, and in that case, industry is configured with two vertically integrated networks, which yields highest incentives to invest in quality of interconnection. When the installed-base difference is sufficiently large, there is no integration in the industry, and neither of the firms have an incentive to invest in quality of interconnection. An industry configuration in which only the large network integrates and excludes (or raises cost of) its downstream rival does not appear as an equilibrium outcome: in the presence of a large asymmetry between the networks, when quality of interconnection is a strategic variable, the large network can exercise a substantial market power without vertical integration. Therefore, a vertically separated industry structure does not necessarily yield procompetitive outcomes. [source] The Economics of Voluntary Traceability in Multi-Ingredient Food ChainsAGRIBUSINESS : AN INTERNATIONAL JOURNAL, Issue 1 2010Diogo M. Souza-Monteiro The consumption of multi-ingredient foods is increasing across the globe. Traceability can be used as a tool to gather information about and manage food safety risks associated with these types of products. The authors investigate the choice of voluntary traceability in three-tiered multi-ingredient food supply chains. They propose a framework based on vertical control and agency theory to model three dimensions of traceability systems: depth, breadth, and precision. Their analysis has three main results. First, full traceability is feasible as long as there are net benefits to a downstream firm that demands traceability across all ingredients. Second, horizontal network externalities are positive because an increase in the level of traceability in one ingredient requires a similar increase in others. Finally, vertical network effects will be positive insofar as willingness to pay and probabilities of food safety hazards increase. [EconLit Classification: Q130, L140]. © 2010 Wiley Periodicals, Inc. [source] Vertical merger: monopolization for downstream quasi-rentsMANAGERIAL AND DECISION ECONOMICS, Issue 3 2009Richard S. Higgins This paper provides a welfare analysis of vertical merger between an input monopolist and downstream firms that compete perfectly in a homogeneous product market. The distinguishing feature of the present model is that the downstream firms face capacity constraints. As a result of downstream quasi-rents, vertical merger,the extent of merger is gauged by the capacity share of the acquired downstream firm,may either raise or lower final output. An analytical criterion for distinguishing pro- and anti-competitive mergers is derived, which relies entirely on pre-merger market quantities and the capacity share of the downstream target. A common result is that vertical merger is output-increasing even when unaffiliated downstream rivals are completely foreclosed. Copyright © 2008 John Wiley & Sons, Ltd. [source] DIVISIONALIZATION AND HORIZONTAL MERGERS IN A VERTICAL RELATIONSHIP*THE MANCHESTER SCHOOL, Issue 3 2009TOMOMICHI MIZUNOArticle first published online: 5 APR 200 In this paper we evaluate the effects of horizontal mergers in a vertical relationship. Each downstream firm can create autonomous divisions. We show that an infinitesimal merger of downstream firms may exhibit a positive welfare effect if the upstream and downstream sectors are sufficiently unconcentrated. However, any merger of upstream firms reduces social welfare. Moreover, a decrease in the concentration in the upstream stage (respectively downstream stage or non-merging stage) makes the welfare effects of the merger in the upstream stage (respectively downstream stage or non-merging stage) less negative (respectively ambiguous or ambiguous). [source] Quality Bargaining and Intermediate Goods Protection*BULLETIN OF ECONOMIC RESEARCH, Issue 2 2001Neil Campbell This paper offers an explanation for the proposition that removing protection from a firm can induce an improvement in product quality. In a vertically separated industry the quality of the final good is dependent on the quality of the intermediate goods used in its production. This model is used to consider removal of protection from the upstream firm (the supplier) which gives the downstream firm (the assembler) greater bargaining power since the option of turning to a foreign supplier becomes more attractive. [source] The Strategic Effects of Vertical Market Structure: Common Agency and Divisionalization in the US Motion Picture IndustryJOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 4 2001Kenneth S. CortsArticle first published online: 28 JAN 200 I examine the release-date scheduling of all motion pictures that went into wide release in the US in 1995 and 1996 to investigate the effects of vertical market structure on competition. The evidence suggests that complex vertical structures involving multiple upstream or downstream firms generally do not achieve efficient outcomes in movie scheduling. In addition, analysis of the data suggests that the production divisions of the major studios act as integrated parts of the studio, rather than as independent competing firms. [source] Product Differentiation and Upstream-Downstream RelationsJOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 2 2001Lynne Pepall This paper examines the relationship between a differentiated downstream market and a specialized upstream market. We analyze three different types of vertical relation between the upstream and downstream sectors when the upstream market supplies specialized and complementary inputs to a downstream product-differentiated market. The first is the benchmark case of decentralized markets, the second is a network of alliances among upstream suppliers, and the third is partial vertical integration. We identify the perfect equilibrium for a symmetric model in each case and show that there is no simple relationship between the degree of connection between upstream and downstream firms and profitability. The key factor affecting prices and the relative profitability of the different market organizations is the degree of product differentiation among the downstream firms, because it affects the intensity of competition among upstream suppliers. We show that vertical foreclosure is not an equilibrium strategy. [source] Discriminatory input pricing and strategic delegationMANAGERIAL AND DECISION ECONOMICS, Issue 4 2010Pei-Cheng Liao This paper examines how discriminatory input pricing by an upstream monopolist affects the incentives that owners of downstream duopolists offer their managers. Regardless of the mode of competition (quantity or price), owners of downstream firms induce their managers to be more profit-oriented and to behave less aggressively when the monopolist is allowed to price-discriminate than when he charges a uniform price. If the monopolist price-discriminates, managerial downstream firms always earn more than owner-managed profit-maximizing firms. However, if the monopolist charges a uniform price, managerial downstream firms earn more than profit-maximizing counterparts under price competition and earn less under quantity competition. Copyright © 2009 John Wiley & Sons, Ltd. [source] Vertical merger: monopolization for downstream quasi-rentsMANAGERIAL AND DECISION ECONOMICS, Issue 3 2009Richard S. Higgins This paper provides a welfare analysis of vertical merger between an input monopolist and downstream firms that compete perfectly in a homogeneous product market. The distinguishing feature of the present model is that the downstream firms face capacity constraints. As a result of downstream quasi-rents, vertical merger,the extent of merger is gauged by the capacity share of the acquired downstream firm,may either raise or lower final output. An analytical criterion for distinguishing pro- and anti-competitive mergers is derived, which relies entirely on pre-merger market quantities and the capacity share of the downstream target. A common result is that vertical merger is output-increasing even when unaffiliated downstream rivals are completely foreclosed. Copyright © 2008 John Wiley & Sons, Ltd. [source] Vertical externality and strategic delegationMANAGERIAL AND DECISION ECONOMICS, Issue 3 2002Eun-Soo Park This paper examines the effects of vertical externality generated by the upstream monopoly on the incentives that owners of competing downstream firms give their managers. It is shown that the introduction of the upstream monopoly may have significant effects on the incentive schemes for the downstream firms' managers. In particular, it is shown that in equilibrium, each owner obtains the simple Nash equilibrium outcome regardless of the mode of competition (quantity or price) in the downstream market. Copyright © 2002 John Wiley & Sons, Ltd. [source] THE ,THICK MARKET' EFFECT AND AGGLOMERATION IN HIGH-GROWTH INDUSTRIESPACIFIC ECONOMIC REVIEW, Issue 2 2005Mikhail M. Klimenko In the model, agglomerative effects result from positive feedback between competitive forces in the upstream and downstream segments of a high-technology industry, rather than as a result of traditional scale economies in the manufacturing of standardized products. The model assumes that firms in the upstream service supply industry have ex ante uncertain costs and compete in Bertrand fashion for the independent demands of downstream firms. This framework explains the mechanism of spatial clustering in industries with a high rate of innovation. [source] DIVISIONALIZATION AND HORIZONTAL MERGERS IN A VERTICAL RELATIONSHIP*THE MANCHESTER SCHOOL, Issue 3 2009TOMOMICHI MIZUNOArticle first published online: 5 APR 200 In this paper we evaluate the effects of horizontal mergers in a vertical relationship. Each downstream firm can create autonomous divisions. We show that an infinitesimal merger of downstream firms may exhibit a positive welfare effect if the upstream and downstream sectors are sufficiently unconcentrated. However, any merger of upstream firms reduces social welfare. Moreover, a decrease in the concentration in the upstream stage (respectively downstream stage or non-merging stage) makes the welfare effects of the merger in the upstream stage (respectively downstream stage or non-merging stage) less negative (respectively ambiguous or ambiguous). [source] Market power, price discrimination, and allocative efficiency in intermediate-goods marketsTHE RAND JOURNAL OF ECONOMICS, Issue 4 2009Roman Inderst We consider a monopolistic supplier's optimal choice of two-part tariff contracts when downstream firms are asymmetric. We find that the optimal discriminatory contracts amplify differences in downstream firms' competitiveness. Firms that are larger,either because they are more efficient or because they sell a superior product,obtain a lower wholesale price than their rivals. This increases allocative efficiency by favoring the more productive firms. In contrast, we show that a ban on price discrimination reduces allocative efficiency and can lead to higher wholesale prices for,all,firms. As a result, consumer surplus, industry profits, and welfare are lower. [source] | ||||||||||