Endogenous retailer preferences in intermediate good markets

Garcia-Gallego, A., Georgantzis, N. and Orts-Rios, V. (2001) Endogenous retailer preferences in intermediate good markets. The International Review of Retail, Distribution and Consumer Research, 11 (2). pp. 123-139. ISSN 0959-3969 doi: 10.1080/09593960122186

Abstract/Summary

We model strategic interaction in a differentiated input market as a game among two suppliers and n retailers. Each one of the upstream firms chooses the specification of the input which it will offer.Then, retailers choose their type from a continuum of possibilities. The decisions made in these two first stages affect the degree of compatibility between each retailer's ideal input specification and that of the inputs offered by the two upstream firms. In a third stage, upstream firms compete setting input prices. Equilibrium may be of the two-vendor policy or of the technological monopoly type.