Nolan, James

May, 2015

By: Çakır, Metin; Nolan, James
We explore how market power in a complementary input sector compares to that in a downstream sector for producer and consumer welfare. We develop a model of a homogeneous product market encompassing bilateral and complementary relationships. Our main finding is that market power exercised by the supplier of a complementary input generates greater negative welfare effects than the same level of market power exercised by downstream firms. We provide a discussion of the implications of the results for policy in the context of current problems in the Canadian grain-handling and transportation system.