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Equilibrium Distribution Systems Under Retailers' Strategic Behavior

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Author Info

  • José J. Sempere Monerris

    ()
    (Universitat de València)

  • Rafael Moner Colonques

    ()
    (Universitat de València)

  • Amparo Urbano

    (Universitat de València)

Abstract

This paper investigates what are the equilibrium distribution systems in a successive duopoly when retailers hold the power to choose the number of products they wish to market. Since they both can be multi-product sellers, the number of possible channel structures considered is larger than in previous work. Then, we study whether the resulting distribution systems obtained in earlier papers still remain. In particular, whether there are incentives to adopt exclusive distribution agreements, whether a manufacturer is foreclosed from the market and, essentially, whether there exists, at equilibrium, enough inter and intra-brand competition. The analysis shows that provided low brand asymmetry, it is sufficient that retailers hold the power to choose the number of products they wish to distribute to obtain endogenously both inter and intra-brand competition; both retailers become multi-product sellers. However, as the profitability of brands diverges sufficiently, only the most profitable brand will be distributed by both retailers thus only arising intra-brand competition at equilibrium. Neither the exclusive distribution system nor a common distribution system analized in the previous literature appears at equilibrium.

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Bibliographic Info

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2001-01.

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Length: 33 pages
Date of creation: Jan 2001
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2001-01

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Related research

Keywords: Distribution systems; retailer power.;

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References

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  1. Tommy Gabrielsen, 1996. "The foreclosure argument for exclusive dealing: The case of differentiated retailers," Journal of Economics, Springer, vol. 63(1), pages 25-40, February.
  2. Lin, Y Joseph, 1990. "The Dampening-of-Competition Effect of Exclusive Dealing," Journal of Industrial Economics, Wiley Blackwell, vol. 39(2), pages 209-23, December.
  3. Shaffer, Greg, 1991. "Capturing Strategic Rent: Full-Line Forcing, Brand Discounts, Aggregate Rebates, and Maximum Resale Price Maintenance," Journal of Industrial Economics, Wiley Blackwell, vol. 39(5), pages 557-75, September.
  4. Tommy Staahl Gabrielsen & Lars Sørgard, 1999. "Exclusive versus Common Dealership," Southern Economic Journal, Southern Economic Association, vol. 66(2), pages 353-366, October.
  5. B. Douglas Bernheim & Michael D. Whinston, 1985. "Common Marketing Agency as a Device for Facilitating Collusion," RAND Journal of Economics, The RAND Corporation, vol. 16(2), pages 269-281, Summer.
  6. Besanko, David & Perry, Martin K., 1994. "Exclusive dealing in a spatial model of retail competition," International Journal of Industrial Organization, Elsevier, vol. 12(3), pages 297-329, September.
  7. Bonanno, Giacomo & Vickers, John, 1988. "Vertical Separation," Journal of Industrial Economics, Wiley Blackwell, vol. 36(3), pages 257-65, March.
  8. Bernheim, B.D., 1992. "Exclusive Dealing," Harvard Institute of Economic Research Working Papers 1622, Harvard - Institute of Economic Research.
  9. repec:fth:eeccco:119 is not listed on IDEAS
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Cited by:
  1. Igor Muraviev, 2007. "Equilibrium Configurations of Distribution Channels in Bilaterally Oligopolistic Industries," Working Papers hal-00243078, HAL.
  2. José J. Sempere Monerris & Rafael Moner Colonques & Amparo Urbano, 2000. "Product Quality And Distribution Channels," Working Papers. Serie AD 2000-19, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).

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