IDEAS home Printed from https://ideas.repec.org/a/bpj/bejeap/v13y2013i2p595-626n16.html
   My bibliography  Save this article

Vertical Contracts and Mandatory Universal Distribution

Author

Listed:
  • Karp Larry S.
  • Perloff Jeffrey M.

    (Department of Agricultural and Resource Economics, University of California, 207 Giannini Hall, Berkeley, CA 94720, USA)

Abstract

An upstream monopoly that provides a new good to a downstream oligopoly might prefer to sell to a single rather than to multiple downstream firms. For example, Apple initially sold its iPhone through one vendor. If a monopoly uses a single vendor, the government may impose a mandatory universal distribution (MUD) requirement that forces the monopoly to sell to all downstream vendors. However, if the income elasticity of demand for the new good is greater than the income elasticity of the existing generic good, the MUD requirement leads to a higher equilibrium price for both the new good and the generic and lowers consumer welfare.

Suggested Citation

  • Karp Larry S. & Perloff Jeffrey M., 2013. "Vertical Contracts and Mandatory Universal Distribution," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 13(2), pages 595-626, October.
    • Handle: RePEc:bpj:bejeap:v:13:y:2013:i:2:p:595-626:n:16
    DOI: 10.1515/bejeap-2012-0073
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/bejeap-2012-0073
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1515/bejeap-2012-0073?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Cédric Argenton, 2010. "Exclusive Quality," Journal of Industrial Economics, Wiley Blackwell, vol. 58(3), pages 690-716, September.
    2. Oliver Hart & Jean Tirole, 1990. "Vertical Integration and Market Foreclosure," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1990 Micr), pages 205-286.
    3. Sofia Berto Villas‐Boas, 2009. "An empirical investigation of the welfare effects of banning wholesale price discrimination," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 20-46, March.
    4. Innes, Robert & Hamilton, Stephen F., 2006. "Naked slotting fees for vertical control of multi-product retail markets," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 303-318, March.
    5. Bustos Alvaro E & Galetovic Alexander, 2009. "Vertical Integration and Sabotage with a Regulated Bottleneck Monopoly," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-52, September.
    6. Yoshihiro Yoshida, 2000. "Third-Degree Price Discrimination in Input Markets: Output and Welfare," American Economic Review, American Economic Association, vol. 90(1), pages 240-246, March.
    7. Katz, Michael L, 1987. "The Welfare Effects of Third-Degree Price Discrimination in," American Economic Review, American Economic Association, vol. 77(1), pages 154-167, March.
    8. Abito, Jose Miguel & Wright, Julian, 2008. "Exclusive dealing with imperfect downstream competition," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 227-246, January.
    9. Rafael Moner-Colonques & José J. Sempere-Monerris & Amparo Urbano, 2004. "The Manufacturers’ Choice of Distribution Policy under Successive Duopoly," Southern Economic Journal, John Wiley & Sons, vol. 70(3), pages 532-548, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Henrik Vetter, 2017. "Pricing and market conduct in a vertical relationship," Journal of Economics, Springer, vol. 121(3), pages 239-253, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Karp, Larry & Perloff, Jeffrey, 2011. "The iPhone Goes Downstream: Mandatory Universal Distribution∗," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt7vc007jh, Department of Agricultural & Resource Economics, UC Berkeley.
    2. Karp, Larry S. & Perloff, Jeffrey M., 2011. "The iPhone goes downstream: mandatory universal distribution," CUDARE Working Papers 123636, University of California, Berkeley, Department of Agricultural and Resource Economics.
    3. Allain, Marie-Laure & Chambolle, Claire & Turolla, Stéphane, 2022. "The Effect of Input Price Discrimination on Retail Prices: Theory and Evidence from France," Working Papers 327329, Institut National de la recherche Agronomique (INRA), Departement Sciences Sociales, Agriculture et Alimentation, Espace et Environnement (SAE2).
    4. Janssen, Maarten & Reshidi, Edona, 2018. "Retail Discrimination in Search Markets," CEPR Discussion Papers 12945, C.E.P.R. Discussion Papers.
    5. Chin-Sheng Chen, 2017. "Price Discrimination in Input Markets and Quality Differentiation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 50(3), pages 367-388, May.
    6. Wang, Xingtang, 2022. "Input price discrimination, pricing contract and social welfare," Mathematical Social Sciences, Elsevier, vol. 119(C), pages 91-96.
    7. Hiroshi Kitamura & Noriaki Matsushima & Misato Sato, 2024. "How Does Downstream Firms’ Efficiency Affect Exclusive Supply Agreements?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 64(2), pages 219-242, March.
    8. Chin-Sheng Chen & Hong Hwang, 2014. "Spatial Price Discrimination in Input Markets with an Endogenous Market Boundary," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 45(2), pages 139-152, September.
    9. Yonezawa, Koichi & Gomez, Miguel I. & Richards, Timothy J., 2018. "The Robinson-Patman Act and Vertical Relationships in Food Retailing," 2018 Annual Meeting, August 5-7, Washington, D.C. 274204, Agricultural and Applied Economics Association.
    10. Fabian Herweg & Daniel Müller, 2014. "Price Discrimination in Input Markets: Quantity Discounts and Private Information," Economic Journal, Royal Economic Society, vol. 124(577), pages 776-804, June.
    11. repec:dpr:wpaper:0878 is not listed on IDEAS
    12. Kitamura, Hiroshi & Matsushima, Noriaki & Sato, Misato, 2018. "Exclusive contracts with complementary inputs," International Journal of Industrial Organization, Elsevier, vol. 56(C), pages 145-167.
    13. Asseyer, Andreas, 2020. "Wholesale price discrimination with regulatory asymmetry," Discussion Papers 2020/1, Free University Berlin, School of Business & Economics.
    14. Adachi, Takanori, 2023. "A sufficient statistics approach for welfare analysis of oligopolistic third‐degree price discrimination," International Journal of Industrial Organization, Elsevier, vol. 86(C).
    15. Garcia, Daniel & Janssen, Maarten, 2018. "Retail channel management in consumer search markets," International Journal of Industrial Organization, Elsevier, vol. 58(C), pages 162-182.
    16. Ioannis N. Pinopoulos, 2020. "Input Price Discrimination and Upstream R&D Investments," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(1), pages 85-106, August.
    17. Inderst, Roman & Shaffer, Greg, 2011. "Wholesale Price Determination Under the Threat of Demand-Side Substitution," MPRA Paper 53843, University Library of Munich, Germany.
    18. Herweg, Fabian & Müller, Daniel, 2016. "Discriminatory nonlinear pricing, fixed costs, and welfare in intermediate-goods markets," International Journal of Industrial Organization, Elsevier, vol. 46(C), pages 107-136.
    19. Adachi, Takanori & Ebina, Takeshi, 2014. "Cost pass-through and inverse demand curvature in vertical relationships with upstream and downstream competition," Economics Letters, Elsevier, vol. 124(3), pages 465-468.
    20. Bisceglia, Michele & Padilla, Jorge & Piccolo, Salvatore, 2021. "When prohibiting wholesale price-parity agreements may harm consumers," International Journal of Industrial Organization, Elsevier, vol. 76(C).
    21. Stéphane Caprice & Vanessa von Schlippenbach, 2008. "Competition policy in a concentrated and globalized retail industry," Post-Print hal-02656654, HAL.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bejeap:v:13:y:2013:i:2:p:595-626:n:16. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.