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Endogenous Vertical Restraints in International Trade

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  • Horst Raff
  • Nicolas Schmitt

Abstract

This paper examines interbrand competition between a domestic and a foreign manufacturer who market their products through intermediaries. The contracts manufacturers offer these intermediaries are endogenous. In equilibrium contracts may specify exclusive territories (ET), depending on the degree of substitutability between products and the level and degree of transparency of trade barriers. Trade liberalization, through lower or more transparent barriers, may lead manufacturers to use ET, thereby substituting private anti-competitive arrangements for government-imposed barriers. This substitution may decrease competition and welfare, and thus create a role for competition policy in a freer trade environment.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2000/wp-cesifo-2000-04/cesifo_wp284.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 284.

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Date of creation: 2000
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Handle: RePEc:ces:ceswps:_284

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References

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  1. repec:fth:michin:337 is not listed on IDEAS
  2. Levinsohn, J., 1994. "Competition Policy and International Trade," Working Papers 362, Research Seminar in International Economics, University of Michigan.
  3. 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.
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  8. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-48, June.
  9. Gary R. Saxonhouse, 1993. "What Does Japanese Trade Structure Tell Us about Japanese Trade Policy?," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 21-43, Summer.
  10. Bengt Holmstrom & Roger B. Myerson, 1981. "Efficient and Durable Decision Rules with Incomplete Information," Discussion Papers 495, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Joseph F. Francois & Henrik Horn, 1998. "Competition Policy in an Open Economy," Tinbergen Institute Discussion Papers 98-092/2, Tinbergen Institute.
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  14. repec:fth:michin:362 is not listed on IDEAS
  15. Martin Richardson, . "Trade Policy and Access to Retail Distribution," EPRU Working Paper Series 97-23, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  16. Massimo Motta & Fabrizio Onida, 1997. "Trade Policy and Competition Policy," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 56(1-2), pages 67-97, June.
  17. Sadao Nagaoka, 2000. "International Trade Aspects of Competition Policy," NBER Chapters, in: Deregulation and Interdependence in the Asia-Pacific Region, NBER-EASE Volume 8, pages 55-78 National Bureau of Economic Research, Inc.
  18. Saxonhouse, G.R., 1993. "What Does Japanese Trade Structure Tell Us about Japanese Trade Policy?," Working Papers 337, Research Seminar in International Economics, University of Michigan.
  19. Keith Head & John Ries, 1997. "International Mergers and Welfare under Decentralized Competition Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 1104-23, November.
  20. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, July.
  21. Gal-Or, Esther, 1991. "Duopolistic vertical restraints," European Economic Review, Elsevier, vol. 35(6), pages 1237-1253, August.
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Citations

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Cited by:
  1. Raff, Horst & Schmitt, Nicolas, 2009. "Buyer power in international markets," Journal of International Economics, Elsevier, vol. 79(2), pages 222-229, November.
  2. Horst Raff & Nicolas Schmitt, 2011. "Manufacturers and Retailers in the Global Economy," Kiel Working Papers 1711, Kiel Institute for the World Economy.
  3. Yongmin Chen & Jota Ishikawa & Zhihao Yu, 2002. "Trade Liberalization and Strategic Outsourcing," Carleton Economic Papers 02-12, Carleton University, Department of Economics, revised Jul 2004.
  4. Raff, Horst & Schmitt, Nicolas, 2006. "Exclusive dealing and common agency in international markets," Journal of International Economics, Elsevier, vol. 68(2), pages 485-503, March.
  5. Ganslandt, Mattias & Maskus, Keith E., 2007. "Wholesale Price Discrimination and Parallel Imports," Working Paper Series 702, Research Institute of Industrial Economics.
  6. 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.
  7. 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.
  8. José J. Sempere Monerris & Rafael Moner Colonques & Amparo Urbano Salvador, 2010. "Trade liberalization in vertically related markets," Working Papers. Serie AD 2010-09, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  9. Eckel, Carsten, 2009. "International trade and retailing," BERG Working Paper Series 63, Bamberg University, Bamberg Economic Research Group.

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