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Title:Price-dependent profit sharing as an escape from the Bertrand paradox PDF Logo
Authors:Foros, Øystein
Hagen, Kåre P.
Kind, Hans Jarle
Issue Date:2007
Series/Report no.:CESifo working paper 1927
Abstract:In this paper we show how an upstream firm can prevent destructive competition among downstream firms producing relatively close substitutes by implementing a price-dependent profit-sharing rule. The rule also ensures that the downstream firms undertake investments which benefit the industry in aggregate. The model is consistent with observations from the market for content commodities distributed by mobile networks.
Subjects:profit-sharing
vertical restraints
investments
competition
JEL:L13
L22
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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