Endogenous Timing in a Mixed Duopoly with Vertically Related Markets

Abstract

We examine an endogenous timing game in a mixed oligopoly by focusing on the vertical linkages. Our main findings are as follows. First, under discriminatory input pricing, public (private) leadership emerges in a price-setting (quantity-setting) mixed oligopoly. This results contrast with one-tier mixed oligopoly, where a simultaneous-move in Bertrand competition (Barcena-Ruiz, 2007) or a sequential-move with multiple equilibria in Cournot competition (Pal, 1998) emerges. Second, with downstream Bertrand competition, firmsʼ profit and consumer surplus rankings are reversed between uniform and discriminatory input pricing. Finally, banning (allowing) price discrimination on imported inputs is socially desirable under downstream Bertrand (Cournot) competition.