Research On The Influence Of Vertical Control On Upstream Market Entry

Based on the study of scholars like Rasmusen,Ramseyer and Wiley(1991),Segal and Whinston(2000),Fumagalli and Motta(2006,2008),I firstly built into a model of downstream monopoly--upstream duopoly,and the longitudinal control and Bowley(1965)utility function were introduced into the model.In this paper,I replaced the degree of competition in the downstream with the degree of substitution of the final product,regarded the degree of competition in the downstream market,the incumbent firm's marginal cost and the fixed cost of entering as exogenous variables,and analyzed the relationship between these variables and the entrant's profits,and got the conditions of entry.In this paper,I compared and analyzed the equilibrium state and the social welfare before and after the implementation of vertical control strategy,by using mathematical analysis method.I got the following conclusion: when the incumbent firm is not allowed to carry out the vertical control means,the upstream is more likely to enter with the aggravation of the downstream market competition,however,allowing the incumbent firm to implement vertical control means,it is more difficult for the entrant to enter with higher degree of market competition.As a result,the implementation of vertical control behavior of incumbent enterprise does not change the size of social welfare.Last,I also compared the social welfare of the entrant before and after the entry,and found that the entry of entrant with high efficiency is beneficial to the improvement of the whole social welfare.The conclusions of this paper put forward relevant policy recommendations for anti-trust: to avoid exclusive trade,the government should regulate the market through the implementation of relevant laws and regulations in a highly competitive downstream market.