The ambiguous competitive effects of passive partial forward ownership Articles uri icon

publication date

  • October 2022

start page

  • 540

end page

  • 568

issue

  • 2

volume

  • 89

International Standard Serial Number (ISSN)

  • 0038-4038

Electronic International Standard Serial Number (EISSN)

  • 2325-8012

abstract

  • In a two-tier industry with an upstream monopolist sup-plier and downstream competition with differentiatedgoods, we show that passive partial forward ownership(PPFO) has ambiguous effects on competition and wel-fare. When vertical trading is conducted via linear tariffs,PPFO is pro-competitive and welfare-increasing. Whileunder two-part tariffs, it is anti-competitive and welfare-decreasing. These hold irrespectively of the degree ofproduct differentiation, theobservability or not of con-tract terms, the mode of downstream competition, andthe distribution of bargaining power between firms.

subjects

  • Economics

keywords

  • competition; linear tariffs; partial passive forward ownership; two-part tariffs; welfare