On the Welfare Effects of Exclusive Distribution Arrangements
AbstractThe regulation of vertical relationships between firms is the subject of persistent legal and academic controversy. The literature studying vertical trade relationships seems to assume that an upstream monopolist prefers downstream competition over exclusive distribution arrangements. We derive precise conditions for when an upstream monopolist prefers competing distribution systems over exclusive distribution in the downstream market. We also show that the welfare effects of downstream competition are ambiguous. A downstream oligopoly may have negative welfare properties compared to a downstream monopoly.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 39691.
Date of creation: 24 May 2012
Date of revision:
Exclusive distribution; Competing distribution; Vertical foreclosure; Cournot competition;
Find related papers by JEL classification:
- F10 - International Economics - - Trade - - - General
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
- D4 - Microeconomics - - Market Structure and Pricing
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-08 (All new papers)
- NEP-BEC-2012-07-08 (Business Economics)
- NEP-COM-2012-07-08 (Industrial Competition)
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