"Explaining Cross-Supplies" (replaces the old version which did not contain the graphs)

Pio Baake, Jörg Oechssler and Christoph Schenk
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Christoph Schenk: Wissenschaftszentrum Berlin

Industrial Organization from University Library of Munich, Germany

Abstract: Cross-supplies describe the phenomenon that two or more firms in the same industry supply each other with their final products. A prominent example is the cooperation in the European flat glass industry, which was recently criticized by the European Commission. In a simple model we try to explain what incentives firms may have to use cross-supplies (instead of producing the goods themselves) and what welfare effects cross-supplies have if they are used. Contrary to the ruling of the European Commission we find that cross-supplies are welfare improving whenever they are employed. Furthermore, for a large range of parameters, they are even benefiting consumers.

JEL-codes: L (search for similar items in EconPapers)
Date: 1996-03-27, Revised 1996-04-06
Note: FTP submission, ps-file. JEL numbers: L 13, L 22
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpio:9603005

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