Price vs. quantity competition in vertically related markets. Generalization

- Generalization of the result on wholesale prices illustrated in Alipranti et al. (2014).
- Wholesale prices are above marginal costs if retailers compete in prices.
- Wholesale prices are below marginal costs if retailers compete in quantities.

This paper generalizes the result of Alipranti et al. (2014) regarding the wholesale prices: I prove that upstream firms always charge the wholesale prices above (below) their marginal costs in case of Bertrand (Cournot) competition downstream. Alipranti et al. (2014) demonstrates this result for the case of linear demand functions and monopolist that sells its product to two retailers. I relax the assumption of linear demands, allow for arbitrary number of retailers and for the competition upstream.