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, and Yassine Lefouili, “Decentralizing Cooperation through Upstream Bilateral Agreements”, TSE Working Paper, n. 20-1119, June 2020.
TSE Working Paper, n. 20-1119, June 2020