Price and Quantity Competition under Vertical Pricing

Creative Commons License

Basak D.

GAMES, vol.14, no.4, 2023 (ESCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 14 Issue: 4
  • Publication Date: 2023
  • Doi Number: 10.3390/g14040053
  • Journal Name: GAMES
  • Journal Indexes: Emerging Sources Citation Index (ESCI), Scopus, Academic Search Premier, ABI/INFORM, Aerospace Database, Communication Abstracts, EconLit, Metadex, zbMATH, Directory of Open Access Journals, Civil Engineering Abstracts
  • Azerbaijan State University of Economics (UNEC) Affiliated: No

Abstract

We consider a vertically related market where one quantity-setting and another price-setting downstream firm negotiate the terms of a two-part tariff contract with an upstream input supplier. In contrast to the traditional belief, we show that the price-setting firm produces a higher output and earns a higher profit than the quantity-setting firm when bargaining is decentralised. Additionally, both firms produce the same output, whereas the profit is higher under the price-setting firm than the quantity-setting firm when bargaining is centralised.