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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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  1. James E. Rauch, 1996. "Networks versus Markets in International Trade," NBER Working Papers 5617, National Bureau of Economic Research, Inc.
  2. Henrik Horn & James Levinsohn, 1997. "Merger Policies and Trade Liberalization," NBER Working Papers 6077, National Bureau of Economic Research, Inc.
  3. Martin Richardson, 2004. "Trade Policy and Access to Retail Distribution," Review of International Economics, Wiley Blackwell, Wiley Blackwell, vol. 12(4), pages 676-688, 09.
  4. Gary R. Saxonhouse, 1993. "What Does Japanese Trade Structure Tell Us about Japanese Trade Policy?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 7(3), pages 21-43, Summer.
  5. Jeffrey Frankel & Andrew Rose, 2002. "An Estimate Of The Effect Of Common Currencies On Trade And Income," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 117(2), pages 437-466, May.
  6. Gal-Or, Esther, 1991. "Duopolistic vertical restraints," European Economic Review, Elsevier, Elsevier, vol. 35(6), pages 1237-1253, August.
  7. Gallini, Nancy T. & Hollis, Aidan, 1999. "A contractual approach to the gray market," International Review of Law and Economics, Elsevier, Elsevier, vol. 19(1), pages 1-21, March.
  8. Sadao Nagaoka, 1998. "International Trade Aspects of Competition Policy," NBER Working Papers 6720, National Bureau of Economic Research, Inc.
  9. Keith Head & John Ries, 1997. "International Mergers and Welfare under Decentralized Competition Policy," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 30(4), pages 1104-23, November.
  10. Massimo Motta & Fabrizio Onida, 1997. "Trade Policy and Competition Policy," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 56(1-2), pages 67-97, June.
  11. Feenstra, Robert C., 1989. "Symmetric pass-through of tariffs and exchange rates under imperfect competition: An empirical test," Journal of International Economics, Elsevier, Elsevier, vol. 27(1-2), pages 25-45, August.
  12. Bengt Holmstrom & Roger B. Myerson, 1981. "Efficient and Durable Decision Rules with Incomplete Information," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 495, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  13. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195102680, October.
  14. Fargeix, Andre & Perloff, Jeffrey M., 1989. "The effect of tariffs in markets with vertical restraints," Journal of International Economics, Elsevier, Elsevier, vol. 26(1-2), pages 99-117, February.
  15. Richardson, Martin, 1999. "Trade and Competition Policies: Concordia Discors?," Oxford Economic Papers, Oxford University Press, vol. 51(4), pages 649-64, October.
  16. James Levinsohn, 1994. "Competition Policy and International Trade," NBER Working Papers 4972, National Bureau of Economic Research, Inc.
  17. Joseph F. Francois & Henrik Horn, 1998. "Competition Policy in an Open Economy," Tinbergen Institute Discussion Papers, Tinbergen Institute 98-092/2, Tinbergen Institute.
  18. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 15(30), pages 7-46, 04.
  19. repec:fth:michin:337 is not listed on IDEAS
  20. repec:fth:michin:362 is not listed on IDEAS
  21. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, American Economic Association, vol. 83(3), pages 525-48, June.
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Citations

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Cited by:
  1. Mattias Ganslandt & Keith E. Maskus, 2007. "Wholesale Price Discrimination and Parallel Imports," CESifo Working Paper Series, CESifo Group Munich 1951, CESifo Group Munich.
  2. Carsten Eckel, 2009. "International Trade and Retailing," CESifo Working Paper Series, CESifo Group Munich 2597, CESifo Group Munich.
  3. Raff, Horst & Schmitt, Nicolas, 2006. "Exclusive dealing and common agency in international markets," Journal of International Economics, Elsevier, Elsevier, vol. 68(2), pages 485-503, March.
  4. Ganslandt, Mattias & Maskus, Keith E., 2005. "Vertical Distribution, Parallel Trade, and Price Divergence in Integrated Markets," Working Paper Series, Research Institute of Industrial Economics 639, Research Institute of Industrial Economics.
  5. Horst Raff & Nicolas Schmitt, 2009. "Buyer Power in International Markets," CESifo Working Paper Series, CESifo Group Munich 2755, CESifo Group Munich.
  6. Horst Raff & Nicolas Schmitt, 2011. "Manufacturers and Retailers in the Global Economy," CESifo Working Paper Series, CESifo Group Munich 3508, CESifo Group Munich.
  7. Chen, Yongmin & Ishikawa, Jota & Yu, Zhihao, 2004. "Trade liberalization and strategic outsourcing," Journal of International Economics, Elsevier, Elsevier, vol. 63(2), pages 419-436, July.
  8. Felbermayr, Gabriel J. & Jung, Benjamin, 2008. "Trade intermediaries, incomplete contracts, and the choice of export modes," Tübinger Diskussionsbeiträge, University of Tübingen, School of Business and Economics 317, University of Tübingen, School of Business and Economics.
  9. José J. Sempere Monerris & Rafael Moner Colonques & Amparo Urbano Salvador, 2010. "Trade liberalization in vertically related markets," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2010-09, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).

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