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The iPhone goes downstream: mandatory universal distribution

Author

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  • Karp, Larry S.
  • Perloff, Jeffrey M.

Abstract

Apple’s original decision to market iPhones using a single downstream vendor prompted calls for mandatory universal distribution (MUD), whereby all downstream vendors would sell the iPhone under the same contract terms. The upstream monopoly may want either one or more downstream vendors, and, in either case, consumer welfare may be higher with either one or more firms. If the income elasticity of demand for the new good is greater than the income elasticity of the existing generic good, the MUD requirements leads to a higher equilibrium price for both the new good and the generic, and therefore lowers consumer welfare.

Suggested Citation

  • Karp, Larry S. & Perloff, Jeffrey M., 2011. "The iPhone goes downstream: mandatory universal distribution," CUDARE Working Papers 123636, University of California, Berkeley, Department of Agricultural and Resource Economics.
    • Handle: RePEc:ags:ucbecw:123636
    DOI: 10.22004/ag.econ.123636
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    References listed on IDEAS

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