On the pro-competitive effects of passive partial backward ownership Articles uri icon

publication date

  • April 2022

volume

  • 213

International Standard Serial Number (ISSN)

  • 0165-1765

Electronic International Standard Serial Number (EISSN)

  • 1873-7374

abstract

  • We consider a vertically related market where an upstream monopolist supplier trades, via interim observable two-part tariff contracts, with two differentiated downstream Cournot competitors. We show that passive partial backward ownership (PPBO) is pro-competitive and welfare enhancing. PPBO exacerbates the upstream monopolist's commitment problem and yields lower wholesale prices, and higher industry output, consumers surplus, and welfare than in the absence of PPBO.

subjects

  • Economics

keywords

  • interim observable contracts; passive partial backward ownership; two-part tariffs; vertical relations