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Endogenous vertical restraints in international trade

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  • Raff, Horst
  • Schmitt, Nicolas

Abstract

This paper examines interbrand competition between a domestic and a foreign manufacturer who market their products through intermediaries. The contracts manufacturers offer these intermediaries are endogenous. In equilibrium, contracts may specify exclusive territories (ET), depending on the degree of substitutability between products and the level and degree of transparency of trade barriers. Trade liberalization, through lower or more transparent barriers, may lead manufacturers to use ET, thereby substituting private anti-competitive arrangements for government-imposed barriers. This substitution may decrease competition and welfare, and thus create a role for competition policy in a free trade environment.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 49 (2005)
Issue (Month): 7 (October)
Pages: 1877-1889

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Handle: RePEc:eee:eecrev:v:49:y:2005:i:7:p:1877-1889

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References

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  2. Sadao Nagaoka, 1998. "International Trade Aspects of Competition Policy," NBER Working Papers 6720, National Bureau of Economic Research, Inc.
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  11. Joseph F. Francois & Henrik Horn, 1998. "Competition Policy in an Open Economy," Tinbergen Institute Discussion Papers 98-092/2, Tinbergen Institute.
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  14. Feenstra, Robert C., 1989. "Symmetric pass-through of tariffs and exchange rates under imperfect competition: An empirical test," Journal of International Economics, Elsevier, vol. 27(1-2), pages 25-45, August.
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  20. Gal-Or, Esther, 1991. "Duopolistic vertical restraints," European Economic Review, Elsevier, vol. 35(6), pages 1237-1253, August.
  21. Massimo Motta & Fabrizio Onida, 1997. "Trade Policy and Competition Policy," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 56(1-2), pages 67-97, June.
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Citations

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Cited by:
  1. José J. Sempere Monerris & Rafael Moner Colonques & Amparo Urbano Salvador, 2010. "Trade liberalization in vertically related markets," Working Papers. Serie AD 2010-09, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  2. Felbermayr, Gabriel J. & Jung, Benjamin, 2008. "Trade intermediaries, incomplete contracts, and the choice of export modes," Tübinger Diskussionsbeiträge 317, University of Tübingen, School of Business and Economics.
  3. Raff, Horst & Schmitt, Nicolas, 2009. "Buyer power in international markets," Journal of International Economics, Elsevier, vol. 79(2), pages 222-229, November.
  4. Raff, Horst & Schmitt, Nicolas, 2004. "Exclusive Dealing and Common Agency in International Markets," Economics Working Papers 2004,09, Christian-Albrechts-University of Kiel, Department of Economics.
  5. Ganslandt, Mattias & Maskus, Keith E., 2007. "Vertical distribution, parallel trade, and price divergence in integrated markets," European Economic Review, Elsevier, vol. 51(4), pages 943-970, May.
  6. Mattias Ganslandt & Keith E. Maskus, 2007. "Wholesale Price Discrimination and Parallel Imports," CESifo Working Paper Series 1951, CESifo Group Munich.
  7. Yongmin Chen & Jota Ishikawa & Zhihao Yu, 2002. "Trade Liberalization and Strategic Outsourcing," Carleton Economic Papers 02-12, Carleton University, Department of Economics, revised Jul 2004.
  8. Horst Raff & Nicolas Schmitt, 2011. "Manufacturers and Retailers in the Global Economy," CESifo Working Paper Series 3508, CESifo Group Munich.
  9. Carsten Eckel, 2009. "International Trade and Retailing," CESifo Working Paper Series 2597, CESifo Group Munich.

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