DP14974 Decentralizing Cooperation through Upstream Bilateral Agreements
|Author(s):||Doh-Shin Jeon, Yassine Lefouili|
|Publication Date:||June 2020|
|Keyword(s):||Bilateral oligopoly, Cooperation, upstream agreements|
|Programme Areas:||Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=14974|
We consider an industry with nâ?¥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.