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Exclusive Dealing and Common Agency in International Markets

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  • Horst Raff
  • Nicolas Schmitt

Abstract

This paper investigates the contractual choice between exclusive dealing and common agency in a simple international oligopoly model where products are sold through intermediaries. We find that when trade barriers are high domestic firms tend to adopt exclusive dealing contracts, whereas trade liberalization may lead firms to choose common agency. Irrespective of the level of trade barriers, the equilibrium contract adopted by each manufacturer is shown to decrease domestic welfare as compared to the other possible contract when products are close substitutes.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2004/wp-cesifo-2004-04/cesifo1_wp1168.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1168.

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Date of creation: 2004
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Handle: RePEc:ces:ceswps:_1168

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References

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  1. Horst Raff & Nicolas Schmitt, 2000. "Endogenous Vertical Restraints in International Trade," CESifo Working Paper Series 284, CESifo Group Munich.
  2. Bernheim, B.D., 1992. "Exclusive Dealing," Harvard Institute of Economic Research Working Papers 1622, Harvard - Institute of Economic Research.
  3. Raff, Horst & Schmitt, Nicolas, 2004. "Exclusive Dealing and Common Agency in International Markets," Economics Working Papers 2004,09, Christian-Albrechts-University of Kiel, Department of Economics.
  4. Mathewson, G Frank & Winter, Ralph A, 1987. "The Competitive Effects of Vertical Agreements: Comment," American Economic Review, American Economic Association, vol. 77(5), pages 1057-62, December.
  5. David Besanko & Martin K. Perry, 1993. "Equilibrium Incentives for Exclusive Dealing in a Differentiated Products Oligopoly," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 646-668, Winter.
  6. Martimort, D., 1992. "Exclusive Dealing, Common Agency and Multiprincipals Incentive Thoery," Papers 92.278, Toulouse - GREMAQ.
  7. Gene M. Grossman & Elhanan Helpman, 2002. "Integration Versus Outsourcing In Industry Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 85-120, February.
  8. Fargeix, Andre & Perloff, Jeffrey M., 1989. "The effect of tariffs in markets with vertical restraints," Journal of International Economics, Elsevier, vol. 26(1-2), pages 99-117, February.
  9. Comanor, William S & Frech, H E, III, 1985. "The Competitive Effects of Vertical Agreements?," American Economic Review, American Economic Association, vol. 75(3), pages 539-46, June.
  10. Marvel, Howard P, 1982. "Exclusive Dealing," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 1-25, April.
  11. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, April.
  12. Martin Richardson, 2004. "Trade Policy and Access to Retail Distribution," Review of International Economics, Wiley Blackwell, vol. 12(4), pages 676-688, 09.
  13. Sadao Nagaoka & Akira Goto, 1997. "Vertical Restraints and Market Access," Empirica, Springer, vol. 24(1), pages 21-36, January.
  14. Barbara J. Spencer & Larry D. Qiu, 2000. "Keiretsu and Relationship-Specific Investment: A Barrier to Trade?," NBER Working Papers 7572, National Bureau of Economic Research, Inc.
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Cited by:
  1. Horst Raff & Nicolas Schmitt, 2007. "Buyer Power in International Markets," Discussion Papers dp07-23, Department of Economics, Simon Fraser University.
  2. Eckel, Carsten, 2009. "International trade and retailing," BERG Working Paper Series 63, Bamberg University, Bamberg Economic Research Group.
  3. Horst Raff & Nicolas Schmitt, 2004. "Exclusive Dealing and Common Agency in International Markets," CESifo Working Paper Series 1168, CESifo Group Munich.
  4. Horst Raff & Nicolas Schmitt, 2011. "Manufacturers and Retailers in the Global Economy," CESifo Working Paper Series 3508, CESifo Group Munich.
  5. Ganslandt, Mattias & Maskus, Keith E., 2005. "Vertical Distribution, Parallel Trade, and Price Divergence in Integrated Markets," Working Paper Series 639, Research Institute of Industrial Economics.
  6. Felbermayr, Gabriel J. & Jung, Benjamin, 2008. "Trade intermediaries, incomplete contracts, and the choice of export modes," Tübinger Diskussionsbeiträge 317, University of Tübingen, School of Business and Economics.

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