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The iPhone goes downstream: mandatory universal distribution

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  • Karp, Larry

    ()
    (University of California, Berkeley. Dept of agricultural and resource economics)

  • Perloff, Jeffrey

    ()
    (University of California, Berkeley. Dept of agricultural and resource economics)

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.

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Bibliographic Info

Paper provided by University of California at Berkeley, Department of Agricultural and Resource Economics and Policy in its series CUDARE Working Paper Series with number 1125.

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Length: 35 pages
Date of creation: Dec 2011
Date of revision:
Handle: RePEc:are:cudare:1125

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Keywords: vertical restrictions; mandatory universal distribution; new product oligopoly;

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