Abstract
This paper demonstrates that the standard conclusions regarding the comparison of Cournot and Bertrand competition are reversed in a vertically related market with upstream monopoly and trading via two-part tariffs. In such a market, downstream Cournot competition yields higher output, lower wholesale prices, lower final prices, higher consumers' surplus, and higher total welfare than Bertrand competition.
| Original language | English |
|---|---|
| Pages (from-to) | 122-126 |
| Number of pages | 5 |
| Journal | Economics Letters |
| Volume | 124 |
| Issue number | 1 |
| Early online date | 9 May 2014 |
| DOIs | |
| Publication status | Published - 1 Jul 2014 |
Funding
We would like to thank an anonymous referee and the associate editor for their helpful comments and suggestions. This research has been co-financed by the European Union (European Social Fund - ESF) and Greek national funds through the Operational Program “Education and Lifelong Learning” of the National Strategic Reference Framework (NSRF) - Research Funding Program ( 379331 ): Thalis - Athens University of Economics and Business - “New Methods in the Analysis of Market Competition: Oligopoly, Networks and Regulation”. Full responsibility for all shortcomings is ours.
Keywords
- Bertrand
- Cournot
- Two-part tariffs
- Vertical relations