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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. Copyright RSAI 2005.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1435-5957.2005.00014.x
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Bibliographic Info

Article provided by Wiley Blackwell in its journal Papers in Regional Science.

Volume (Year): 84 (2005)
Issue (Month): 2 (06)
Pages: 221-237

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Handle: RePEc:bla:presci:v:84:y:2005:i:2:p:221-237

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1056-8190

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