Market Power in Vertically Related Markets
A French-German cooperation project funded by the Agence Nationale de la Recherche (ANR) and Deutsche Forschungsgemeinschaft (DFG).
Events:
Principal investigators:
Dr. Stéphane Caprice (Toulouse)
Research Fellow INRA
Toulouse School of Economics (GREMAQ)
Manufacture des Tabacs,
Aile J.J. Laffont 21 allée de Brienne
31000 Toulouse (France)
tel: +33.(0)5.61.12.85.78
e-mail : caprice@toulouse.inra.fr
Prof. Dr. Roland Strausz (HU-Berlin)
Humboldt-Universität zu Berlin
Institut für Mikroökonomische Theorie
Spandauerstraße 1
10178 Berlin (Germany)
tel: +49.(0)30.2093.5676
e-mail: strauszr@wiwi.hu-berlin.de
Prof. Dr. Christian Wey (DICE)
Düsseldorfer Institut für Wettbewerbsökonomie (DICE)
Heinrich-Heine-Universität Düsseldorf
Universitätsstr. 1
40225 Düsseldorf
tel: +49.(0)211.81.15.055
e-mail: wey@dice.uni-duesseldorf.de
French partners:
CREST-LEI 28
rue des Saints-Pères
75007 Paris (France)
Ecole Polytechnique
Département d’Economie 1 Rue Descartes
75005 Paris (France)
Toulouse School of Economics (TSE)
Manufacture des Tabacs, Aile J.J. Laffont 21 allée de Brienne
31000 Toulouse (France)
German partners:
DIW Berlin
Mohrenstraße 58
10117 Berlin (Germany)
Humboldt-Universität zu Berlin
Spandauerstraße 1
10178 Berlin (Germany)
Ludwig-Maximilians-Universität München
Kaulbachstr. 45
80539 München (Germany)
Universität Mannheim
L7, 3-5
68131 Mannheim (Germany)
Project summary:
The classical view of producers selling directly to final consumers is the exception rather than the rule in modern economies. In most markets, producers and consumers interact with each other through retailers and other intermediaries. The typical production structure is, therefore, one of vertical chains, where both sellers and buyers have some degree of market power. The goal of our research project is to gain a deeper understanding on how an explicit account of the vertically separated structure of value chains affects market performance. We focus on the effect of imperfect competition in vertical chains. In particular, we ask how the balance of market power within the vertical structure affects economic efficiency in general and prices, quality, and the product variety of products in particular. Ultimately, our proposed research on vertical chains is meant to lead to robust guidelines for policy makers in the arena of modern competition policy.
Although some important work on vertical chains has been done, there are many open questions, especially with regard to the policy implications of market power in vertical structures. At present the participating investigators are already working independently on different issues of vertical chains. This research proposal unites and unifies these diverse efforts into a focused research group. Our group will increase the interaction between the participants, avoid duplication of research efforts, and benefit from complementarities in order to advance research on vertical production chains.
The overall project is structured in four modular work packages. In the first work package we deal with the mode of competition in vertical structures, where we focus on the role of price discrimination, resale price maintenance, and collusion. Work package 2 focuses on buyer power; in particular, the determinants of buyer power and its effects on investment incentives and product quality outcomes. In work package 3 we consider complementarities (provoked by one-stop shopping preferences) in the production chain and how they affect integration incentives and location choice. Finally, in work package 4, we analyze the issue of consumers’ imperfect quality information on the organization of vertical chains where we focus on issues of certification and branding of products.
Research Topics:
WORK PACKAGE 1: VERTICAL RESTRAINTS AND COMPETITION
Task 1.1: Price Discrimination in Input Markets
Task 1.2: Resale Price Maintenance and Competition
Task 1.3: Vertical Restraints and Collusion
WORK PACKAGE 2: BUYER POWER
Task 2.1: Determinants of Buyer Power
Task 2.2: Buyer Power and Product Quality
WORK PACKAGE 3: COMPLEMENTARITIES
Task 3.1: Vertical and Horizontal Integration
Task 3.2: Choice of Location and Product Line
WORK PACKAGE 4: IMPERFECT INFORMATION, QUALITY AND BRANDING
Task 4.1: Quality Decisions, Reputation and Assortment
Task 4.2: Certification in Vertical Relationships
Task 4.3: Branding
Research papers MPinVRM