Cournot-Bertrand equilibria under two-part tariff contract

Basak, Debasmita (2021): Cournot-Bertrand equilibria under two-part tariff contract.

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 when bargaining is decentralised, the price setting firm produces a higher output and earns a higher profit than the quantity setting firm. And, when bargaining is centralised, both firms produce the same output whereas the profit is higher under the price setting firm than the quantity setting firm.

• Item Type: MPRA Paper
• Language: English
• Keywords: Bargaining; Bertrand; Cournot; Two-part tariffs; Vertical pricing; Welfare
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L22 - Firm Organization and Market Structure

References

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