Abstract

This paper first examines the relation between simultaneous and sequential game in a vertical market structure. I show that the equilibrium in the sequential-move games can be duplicated with the asymmetric simultaneous-move games. Vertical separation plays an important role in our conclusion. Vertical separation induces the upstream to set higher (lower) input prices than its marginal costs in Bertrand (Cournot) competition. As a result, the separated upstream firm has the second-mover (first-mover) advantage in Bertrand (Cournot) competition.

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