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Networks of manufacturers and retailers

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  • Mauleon, Ana
  • Sempere-Monerris, Jose J.
  • Vannetelbosch, Vincent J.

Abstract

We study the endogenous formation of networks between manufacturers of differentiated goods and multi-product retailers. We find that, under both types of contracts (linear and two-part tariffs), only three distribution networks are stable for particular values of the degree of product differentiation and link costs: the non-exclusive distribution and non-exclusive dealing network, the exclusive distribution and exclusive dealing network, and a mixed distribution network in which both exclusive and non-exclusive relations are observed. Moreover, the stability of the first two networks is robust to the case of manufacturers with no bargaining power and the case of differentiated retailers who compete in prices. We show that, under both types of contracts, the distribution networks that maximize social welfare are not necessarily stable. Thus, a conflict between stability and social welfare is likely to occur, even more if the degree of product differentiation is low enough.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 77 (2011)
Issue (Month): 3 (March)
Pages: 351-367

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Handle: RePEc:eee:jeborg:v:77:y:2011:i:3:p:351-367

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Keywords: Networks Retailers Manufacturers;

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References

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  1. Ping Wang & Alison Watts, 2006. "Formation of buyer-seller trade networks in a quality-differentiated product market," Canadian Journal of Economics, Canadian Economics Association, vol. 39(3), pages 971-1004, August.
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  3. Ana Mauleon & Jose J. Sempere-Monerris & Vincent Vannetelbosch, 2008. "Networks of knowledge among unionized firms," Canadian Journal of Economics, Canadian Economics Association, vol. 41(3), pages 971-997, August.
  4. Sass, Tim R., 2005. "The competitive effects of exclusive dealing: Evidence from the U.S. beer industry," International Journal of Industrial Organization, Elsevier, vol. 23(3-4), pages 203-225, April.
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  9. Jean-Jacques HERINGS & Ana MAULEON & Vincent J. VANNETELBOSCH, 2001. "Rationalizability for Social Environments," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2001028, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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  21. Jean-Jacques, HERINGS & Ana, MAULEON & Vincent, VANNETELBOSCH, 2006. "Farsightedly stable networks," Discussion Papers (ECON - Département des Sciences Economiques) 2006046, Université catholique de Louvain, Département des Sciences Economiques.
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Citations

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Cited by:
  1. CAULIER, Jean-François & MAULEON, Ana & VANNETELBOSCH, Vincent, . "Contractually stable networks," CORE Discussion Papers RP -2477, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Jean-François Caulier & Ana Mauleon & Jose Sempere-Monerris & Vincent Vannetelbosch, 2013. "Stable and efficient coalitional networks," Review of Economic Design, Springer, vol. 17(4), pages 249-271, December.
  3. BEDAYO, Mikel & MAULEON, Ana & VANNETELBOSCH, Vincent, 2012. "Bargaining and delay in trading networks," CORE Discussion Papers 2012046, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Hemant Patil, 2011. "Buyer–seller networks with demand shocks and intermediation," Review of Economic Design, Springer, vol. 15(2), pages 121-145, June.
  5. repec:hal:wpaper:hal-00633611 is not listed on IDEAS

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