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The economic theory of quasi-exclusive territory

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  • Daisuke Nikae

    (Osaka City University)

  • Takeshi Ikeda

    (Osaka City University)

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    Abstract

    This paper introduces the economic theory of gquasi-exclusive territory.h We consider vertical dealings with two upstream firms and four downstream firms that compete in two separate markets. Under quasi- exclusive territory, downstream firms are bound to pay additional charges when selling goods beyond their territorial areas. We find that with respect to the two-part tariffs comprising a marginal price and a fixed fee, quasi-exclusive territory is more beneficial for upstream firms and more harmful for consumers than conventional exclusive territory. Moreover, we note that quasi-exclusive territory is in practice in various vertical dealings and that its regulation is a difficult task.

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    File URL: http://128.118.178.162/eps/io/papers/0508/0508002.pdf
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    Bibliographic Info

    Paper provided by EconWPA in its series Industrial Organization with number 0508002.

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    Length: 12 pages
    Date of creation: 01 Aug 2005
    Date of revision:
    Handle: RePEc:wpa:wuwpio:0508002

    Note: Type of Document - pdf; pages: 12
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    Web page: http://128.118.178.162

    Related research

    Keywords: Exclusive territory; Quasi-exclusive territory; Vertical dealings; Two-part tariff;

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    1. Jerzy Mycielski & Yohannes E. Riyanto & Filip Wuyts, 2000. "Inter- and Intraband Competition and the Manufacturer-Retailer Relationship," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 156(4), pages 599-, December.
    2. Alexander, Cindy R & Reiffen, David, 1995. "Vertical Contracts as Strategic Commitments: How Are They Enforced?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(4), pages 623-49, Winter.
    3. Shantanu Dutta & Mark Bergen & George John, 1994. "The Governance of Exclusive Territories When Dealers can Bootleg," Marketing Science, INFORMS, vol. 13(1), pages 83-99.
    4. Barrie R. Nault & Albert S. Dexter, 1994. "Adoption, Transfers, and Incentives in a Franchise Network with Positive Externalities," Marketing Science, INFORMS, vol. 13(4), pages 412-423.
    5. G.F. Mathewson & R.A. Winter, 1984. "An Economic Theory of Vertical Restraints," RAND Journal of Economics, The RAND Corporation, vol. 15(1), pages 27-38, Spring.
    6. Lahiri, Sajal & Ono, Yoshiyasu, 1988. "Helping Minor Firms Reduces Welfare," Economic Journal, Royal Economic Society, vol. 98(393), pages 1199-1202, December.
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