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Exclusive dealing and common agency in international markets

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  • Raff, Horst
  • Schmitt, Nicolas

Abstract

This paper investigates the contractual choice between exclusive dealing and common agency in a simple international oligopoly model where products are sold through intermediaries. We find that when trade barriers are high domestic firms tend to adopt exclusive dealing contracts, whereas trade liberalization may lead firms to choose common agency. Irrespective of the level of trade barriers, the equilibrium contract adopted by each manufacturer is shown to decrease domestic welfare as compared to the other possible contract when products are close substitutes.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 68 (2006)
Issue (Month): 2 (March)
Pages: 485-503

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Handle: RePEc:eee:inecon:v:68:y:2006:i:2:p:485-503

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Web page: http://www.elsevier.com/locate/inca/505552

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References

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  1. Sadao Nagaoka & Akira Goto, 1997. "Vertical Restraints and Market Access," Empirica, Springer, vol. 24(1), pages 21-36, January.
  2. Fargeix, Andre & Perloff, Jeffrey M, 1987. "The effect of tariffs in markets with vertical restraints," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt49v754qw, Department of Agricultural & Resource Economics, UC Berkeley.
  3. B. Douglas Bernheim & Michael D. Whinston, . "Exclusive Dealing," Working Papers 96008, Stanford University, Department of Economics.
  4. Martimort, D., 1992. "Exclusive Dealing, Common Agency and Multiprincipals Incentive Thoery," Papers 92.278, Toulouse - GREMAQ.
  5. Barbara J. Spencer & Larry D. Qiu, 2000. "Keiretsu and Relationship-Specific Investment: A Barrier to Trade?," NBER Working Papers 7572, National Bureau of Economic Research, Inc.
  6. 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.
  7. Gene M. Grossman & Elhanan Helpman, 2002. "Integration Versus Outsourcing In Industry Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 85-120, February.
  8. Martin Richardson, 2004. "Trade Policy and Access to Retail Distribution," Review of International Economics, Wiley Blackwell, vol. 12(4), pages 676-688, 09.
  9. Horst Raff & Nicolas Schmitt, 2000. "Endogenous Vertical Restraints in International Trade," CESifo Working Paper Series 284, CESifo Group Munich.
  10. David Besanko & Martin K. Perry, 1993. "Equilibrium Incentives for Exclusive Dealing in a Differentiated Products Oligopoly," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 646-668, Winter.
  11. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919.
  12. Comanor, William S & Frech, H E, III, 1985. "The Competitive Effects of Vertical Agreements?," American Economic Review, American Economic Association, vol. 75(3), pages 539-46, June.
  13. Marvel, Howard P, 1982. "Exclusive Dealing," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 1-25, April.
  14. Mathewson, G Frank & Winter, Ralph A, 1987. "The Competitive Effects of Vertical Agreements: Comment," American Economic Review, American Economic Association, vol. 77(5), pages 1057-62, December.
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Citations

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Cited by:
  1. Horst Raff & Nicolas Schmitt, 2011. "Manufacturers and Retailers in the Global Economy," CESifo Working Paper Series 3508, CESifo Group Munich.
  2. Horst Raff & Nicolas Schmitt, 2009. "Buyer Power in International Markets," CESifo Working Paper Series 2755, CESifo Group Munich.
  3. Horst Raff & Nicolas Schmitt, 2004. "Exclusive Dealing and Common Agency in International Markets," CESifo Working Paper Series 1168, CESifo Group Munich.
  4. Ganslandt, Mattias & Maskus, Keith E., 2005. "Vertical Distribution, Parallel Trade, and Price Divergence in Integrated Markets," Working Paper Series 639, Research Institute of Industrial Economics.
  5. Eckel, Carsten, 2009. "International trade and retailing," BERG Working Paper Series 63, Bamberg University, Bamberg Economic Research Group.
  6. 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.

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