Where to Encourage Entry: Upstream or Downstream

University of Nottingham Economics Discussion Paper No. 03/13

20 Pages Posted: 2 Dec 2003

See all articles by Arijit Mukherjee

Arijit Mukherjee

University of Nottingham - School of Economics

Soma Mukherjee

Keele University - Office of Research & Enterprise

Date Written: August 2003

Abstract

In a vertically separated industry, where the input suppliers have significant market power, not only entry but also the markets (upstream and downstream) with entry possibilities might be a concern to the policy makers. While 'entry in the downstream market only' always increases welfare, 'entry in the upstream market only' increases welfare provided the technology of the upstream entrant is not sufficiently inferior to that of the incumbent. However, entry in the upstream market accompanied by entry in the downstream market may always increase welfare. Our results are important for the competition policy.

JEL Classification: D43, L13, 034

Suggested Citation

Mukherjee, Arijit and Mukherjee, Soma, Where to Encourage Entry: Upstream or Downstream (August 2003). University of Nottingham Economics Discussion Paper No. 03/13, Available at SSRN: https://ssrn.com/abstract=459275 or http://dx.doi.org/10.2139/ssrn.459275

Arijit Mukherjee (Contact Author)

University of Nottingham - School of Economics ( email )

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Soma Mukherjee

Keele University - Office of Research & Enterprise ( email )

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United Kingdom