What Determines Market Structure? An Explanation from Cooperative Investment with Non-Exclusive Contracts

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Resumen

In a common agency setting, where the common buyer undertakes cooperative investment with her suppliers, we obtain a direct link between the level of ex-post competition and in- vestment which affects the market structure of the supply side of the market. We show that more competitive equilibria are associated with a larger and more homogeneous distribution of investment among active suppliers, and an equilibrium with no investment might occur when competition is mild. In our model, buyer’s investment works as a mechanism to incentivize competition, and its effectiveness is positively related to the level of competition ex-post. In general, the equilibrium investment profile is lower than efficiency, and we surprisingly find that higher competitive markets may sustain a larger number of suppliers.
Idioma originalInglés estadounidense
Número de páginas44
EstadoPublicada - mar. 2014

Series de publicaciones

NombreTSE Working Papers
EditorToulouse School of Economics
N.º482
Volumen14

Áreas temáticas de ASJC Scopus

  • Economía, econometría y finanzas (todo)

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