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Inter- and Intraband Competition and the Manufacturer-Retailer Relationship

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Author Info

  • Jerzy Mycielski
  • Yohannes E. Riyanto
  • Filip Wuyts

Abstract

This paper analyses manufacturers' choice of vertical arrangement with retailers. We focus on two types of vertical arrangement; exclusive dealing and exclusive territory. Both are used by manufacturers as instruments to reduce competition between manufacturers. Exclusive dealing is used to avoid a head-to-head competition with other brands within a retail outlet. Thus, it restricts interbrand competition. Exclusive territory is used to eliminate intrabrand competition. Our results show that the choice of vertical arrangement depends on the degree of product substitution. When products are less substitutable, in other words, the interbrand rivalry is weak, manufacturers prefer to sell brands to a large number of competitive retailers. When the interbrand rivalry is strong, exclusive territory with exclusive dealing might be adopted by manufacturers. We derive welfare and antitrust policy implications.

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Bibliographic Info

Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 156 (2000)
Issue (Month): 4 (December)
Pages: 599-

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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200012)156:4_599:iaicat_2.0.tx_2-t

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Cited by:
  1. MAULEON, Ana & SEMPERE MONERRIS, Jose J. & VANNETELBOSCH, Vincent J., . "Networks of manufacturers and retailers," CORE Discussion Papers RP -2291, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Daisuke Nikae & Takeshi Ikeda, 2005. "The economic theory of quasi-exclusive territory," Industrial Organization 0508002, EconWPA.
  3. Takeshi Ikeda & Daisuke Nikae, 2006. "Exclusive territories in the presence of upstream competition," Economics Bulletin, AccessEcon, vol. 4(26), pages 1-6.

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