Journal of Economics

, Volume 70, Issue 1, pp 37–60 | Cite as

Explaining cross-supplies

  • Pio Baake
  • Jörg Oechssler
  • Christoph Schenk


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 attempt 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 improve welfare whenever they are employed. Furthermore, for a large range of parameters, they even benefit consumers.


cross-supplies subcontracting Stackelberg 

JEL classification

L13 L22 


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Copyright information

© Springer-Verlag 1999

Authors and Affiliations

  • Pio Baake
    • 1
  • Jörg Oechssler
    • 1
  • Christoph Schenk
    • 2
  1. 1.Department of EconomicsHumboldt University BerlinBerlinGermany
  2. 2.Wissenschaftszentrum BerlinBerlinGermany

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