Journal
EUROPEAN JOURNAL OF OPERATIONAL RESEARCH
Volume 200, Issue 3, Pages 926-928Publisher
ELSEVIER
DOI: 10.1016/j.ejor.2009.02.020
Keywords
Supply chains; Competition; Pricing; Equilibrium
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The study of the effects of downstream entry on upstream pricing has revealed the counter-intuitive result of the supplier's pricing policy being invariant to a new downstream entry under an isoelastic inverse demand function. We show that this counter-intuitive result is reversed when a new downstream entry affects downstream efficiency. We show that in the presence of increased post-entry downstream efficiency the supplier increases the wholesale price by taking advantage of the increased retail efficiency and competition. We also investigate the applicability of our results under other types of inverse demand functions. (C) 2009 Elsevier B.V. All rights reserved.
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