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Can exclusive territories limit strategic location downstream?

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  • Kenneth Fjell
  • John S. Heywood

Abstract

. Research on spatial price discrimination demonstrates that strategic (off centre) location choices by downstream firms can increase downstream profit and reduce both the profit of an upstream monopoly and social welfare. This article examines exclusive territories as a vertical control mechanism and shows that such territories can force downstream firms to return to the centre of the market. However, exclusive territories cannot completely eliminate the influence of strategic downstream location – the profit maximising exclusive territories are either too small or too large to be socially efficient.

Suggested Citation

  • Kenneth Fjell & John S. Heywood, 2005. "Can exclusive territories limit strategic location downstream?," Papers in Regional Science, Wiley Blackwell, vol. 84(2), pages 221-237, June.
    • Handle: RePEc:bla:presci:v:84:y:2005:i:2:p:221-237
    DOI: 10.1111/j.1435-5957.2005.00014.x
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    References listed on IDEAS

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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    2. Blair, Roger D. & Kaserman, David L., 1983. "Law and Economics of Vertical Integration and Control," Elsevier Monographs, Elsevier, edition 1, number 9780121034801.
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    Cited by:

    1. John S. Heywood & Zheng Wang, 2023. "An upstream monopoly with transport costs," Journal of Economics, Springer, vol. 139(2), pages 159-176, July.
    2. Heywood, John S. & Wang, Shiqiang & Ye, Guangliang, 2018. "Resale price maintenance and spatial price discrimination," International Journal of Industrial Organization, Elsevier, vol. 57(C), pages 147-174.

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