We consider a model of vertical competition where downstream firms (retailers) purchase an upstream input from a monopolist and are able to differentiate from each other in terms of quality. Our primary focus is to study the effects of introducing a large retailer, such as a Wal-Mart...

We describe a classroom experiment that illustrates the concepts of market power and the Lerner Index. Students are organized in groups, each making a decision for a monopolist. Monopolists face different (unknown) demand curves, each with a different (constant) elasticity. Through repetition,...