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The iPhone Goes Downstream: Mandatory Universal Distribution∗

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  • Karp, Larry
  • Perloff, Jeffrey

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 eitherone 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 higherequilibrium price for both the new good and the generic, and therefore lowers consumer welfare.

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Bibliographic Info

Paper provided by Department of Agricultural & Resource Economics, UC Berkeley in its series Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series with number qt7vc007jh.

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Date of creation: 15 Dec 2011
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Handle: RePEc:cdl:agrebk:qt7vc007jh

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Keywords: Social and Behavioral Sciences; vertical restrictions; mandatory universal distribution; new product oligopoly;

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