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Capacity restriction by retailers

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  • Ramón Faulí-Oller

    ()
    (Universidad de Alicante)

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    Abstract

    A monopolist retailer facing two suppliers producing two symmetric and independent goods improves its bargaining position by commiting to sell only one good. We analyze if this advantage extends to the case where there are two undierentiated retailers competing in the same market. With linear supply contracts, we have partial capacity restriction in the sense that only one retailer commits to sell only one good. Then, we have that if retailers were to merge, welfare would decrease because the merger reduces the variety of goods available to consumers.

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2008-02.pdf
    File Function: Fisrt version / Primera version, 2008
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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 2008-02.

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    Length: 14 pages
    Date of creation: Mar 2008
    Date of revision:
    Publication status: Published by Ivie
    Handle: RePEc:ivi:wpasad:2008-02

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    Keywords: Retailing; mergers; variety;

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    1. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
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