We consider an industry with n≥3 firms owning upstream inputs and interacting noncooperatively in a downstream market. Under general conditions, upstream bilateral agreements giving firms access to one another's input lead to industry profit maximization. This decentralization result applies to various upstream agreements including cross-licensing agreements among patent-holding manufacturers, interconnection agreements among telecommunication companies, interbank payments for ATM networks, and data-sharing agreements among competitors or complementors.
Bilateral oligopoly; upstream agreement; cooperation;
- L13: Oligopoly and Other Imperfect Markets
- L41: Monopolization • Horizontal Anticompetitive Practices
Doh-Shin Jeon et Yassine Lefouili, « Decentralizing Cooperation through Upstream Bilateral Agreements », TSE Working Paper, n° 20-1119, juin 2020.
TSE Working Paper, n° 20-1119, juin 2020