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Vertical Control and Price versus Nonprice Competition

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  • Winter, Ralph A

Abstract

This paper considers a manufacturer distributing a product through retailers who compete in price and service, which reduces the time it takes to purchase a good. The mix of these instruments that maximizes collective profit is determined by the tastes of consumers on the "product margin," whereas decentralized retailers consider as well the tastes of consumers on the interretai ler margins. Given search or travel costs, consumers with low time cost s are overrepresented on the interretailer margins. In considering customers on the wrong margin, retailers are, therefore, biased towa rd price competition. This distortion can be corrected with vertical restraints. Copyright 1993, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 108 (1993)
Issue (Month): 1 (February)
Pages: 61-76

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Handle: RePEc:tpr:qjecon:v:108:y:1993:i:1:p:61-76

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Web page: http://mitpress.mit.edu/journals/

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Cited by:
  1. Lewis Evans and Patrick Hughes, 2003. "Competition Policy in Small Distant Open Economies: Some Lessons from the Economics Literature," Treasury Working Paper Series 03/31, New Zealand Treasury.
  2. Wu, Cheng-Han, 2012. "Price and service competition between new and remanufactured products in a two-echelon supply chain," International Journal of Production Economics, Elsevier, vol. 140(1), pages 496-507.
  3. Hao Wang, 2005. "Retailer Heterogeneity, Intra-Brand Competition and Social Welfare," Journal of Industry, Competition and Trade, Springer, vol. 5(2), pages 87-97, June.
  4. Yusong Wang & David Bell & V. Padmanabhan, 2009. "Manufacturer-owned retail stores," Marketing Letters, Springer, vol. 20(2), pages 107-124, June.
  5. Iida, Tetsuo, 2012. "Coordination of cooperative cost-reduction efforts in a supply chain partnership," European Journal of Operational Research, Elsevier, vol. 222(2), pages 180-190.
  6. Yossef Spiegel & Yaron Yehezkel, 2000. "Price and Non-Price Restraints When Retailers are Vertically Differentiated," Econometric Society World Congress 2000 Contributed Papers 1670, Econometric Society.
  7. Hao Wang, 2001. "Resale Price Maintenance in an Oligopoly with Uncertain Demand," Working Papers 01-11, Ohio State University, Department of Economics.
  8. Frank Mathewson & Ralph Winter, 1998. "The Law and Economics of Resale Price Maintenance," Review of Industrial Organization, Springer, vol. 13(1), pages 57-84, April.
  9. Moner-Colonques, Rafael, 2006. "The tradeoffs between retail service and exclusivity in distribution: Welfare and policy implications," International Review of Law and Economics, Elsevier, vol. 26(2), pages 241-261, June.
  10. Wang, Hao, 2004. "Resale price maintenance in an oligopoly with uncertain demand," International Journal of Industrial Organization, Elsevier, vol. 22(3), pages 389-411, March.
  11. Raskovich, Alexander, 2007. "Retail buyer power through steering," Economics Letters, Elsevier, vol. 96(2), pages 221-225, August.
  12. 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.
  13. Kenji, Matsui, 2011. "Resale price maintenance for supply chains distributing products with demand uncertainty," International Journal of Production Economics, Elsevier, vol. 134(2), pages 375-387, December.
  14. Matsui, Kenji, 2014. "Gray-market trade with product information service in global supply chains," International Journal of Production Economics, Elsevier, vol. 147(PB), pages 351-361.
  15. Bakó, Barna & Kálecz-Simon, András, 2012. "Vertikális korlátozások - növelik vagy csökkentik a jólétet?. Érvek az irodalomból
    [Vertical constraints - do they increase or reduce welfare?. Arguments in the literature]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 1138-1159.
  16. Kang, Yeongjae, 1996. "Unobservable Vertical Restraints and Interbrand Competition," Working Paper Series in Economics and Finance 136, Stockholm School of Economics.
  17. Howard Marvel & James Peck, 2000. "Vertical Control, Retail Inventories & Product Variety," Working Papers 00-09, Ohio State University, Department of Economics.
  18. Spiegel, Yossi & Yehezkel, Yaron, 2003. "Price and non-price restraints when retailers are vertically differentiated," International Journal of Industrial Organization, Elsevier, vol. 21(7), pages 923-947, September.
  19. Zenger, Hans, 2009. "Successive Monopolies with Endogenous Quality," MPRA Paper 15659, University Library of Munich, Germany.
  20. Ray, Saibal, 2005. "An integrated operations-marketing model for innovative products and services," International Journal of Production Economics, Elsevier, vol. 95(3), pages 327-345, March.

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