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The B.E. Journal of Theoretical Economics

Editor-in-Chief: Schipper, Burkhard

Ed. by Fong, Yuk-fai / Peeters, Ronald / Puzzello , Daniela / Rivas, Javier / Wenzelburger, Jan

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Online
ISSN
1935-1704
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Successive Oligopolies and Decreasing Returns

Skerdilajda Zanaj
Published Online: 2010-11-09 | DOI: https://doi.org/10.2202/1935-1704.1595

In this paper, we analyze successive oligopolies where downstream firms share the same decreasing returns technology of the Cobb-Douglas type. We stress the differences between the conclusions obtained under this assumption and those resulting from the traditional literature in which output firms use a constant returns technology. It is shown that when firms use a decreasing returns technology, (i) the profit of a downstream firm can decrease when the upstream market is more competitive; (ii) the input price does not tend to the corresponding marginal cost when the number of firms in both markets tends to infinite; and (iii) double marginalization is lower. Finally, the effects of mergers are revisited to highlight the role played by the technology of output firms.

Keywords: successive oligopolies; downstream technology; mergers

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Published Online: 2010-11-09


Citation Information: The B.E. Journal of Theoretical Economics, ISSN (Online) 1935-1704, DOI: https://doi.org/10.2202/1935-1704.1595.

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