Abstract
This paper considers a vertically related market in which a monopolistic upstream firm sells its input to its downstream firms. We examine the effect of information environment （common information or disclosure） about input price on market. We show a trade-off between input price and scale effect. From the upstream firm standpoint of view, disclosure has an advantage of inducing downstream market to be competitive, but has a disadvantage of setting a higher input price. Our main claims are two. One is that the expected input price is lower under disclosure than under common information. The other is that both upstream and downstream firms’ profits may be higher under disclosure than under common information.
