Price-Dependent Profit Sharing as an Escape from the Bertrand Paradox

In this paper we show how an upstream firm can prevent destructive competition among downstream firms producing relatively close substitutes by implementing a price-dependent profit-sharing rule. The rule also ensures that the downstream firms undertake investments which benefit the industry in aggregate. The model is consistent with observations from the market for content commodities distributed by mobile networks.

MoreLess

Year of publication:	2007
Authors:	Foros, Oystein ; Hagen, Kare P. ; Kind, Hans Jarle
Institutions:	CESifo
Subject:	profit-sharing \| vertical restraints \| investments \| competition

More details

Extent:	application/pdf
Series:	CESifo Working Paper Series.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 1927
Classification:	L13 - Oligopoly and Other Imperfect Markets ; L22 - Firm Organization and Market Structure: Markets vs. Hierarchies; Vertical Integration
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005094252