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When Do Independent Distributors Undersupply Promotional Services?

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  • Zenger Hans

    (Charles River Associates)

Abstract

In antitrust practice, it is often argued that independent distributors of goods have an incentive to supply lower levels of brand-specific promotional services than a vertically integrated supplier. This paper outlines the conditions under which this claim is correct. Independent distributors have lower incentives to engage in promotion (i) if economies of scale exist in the provision of promotional services and (ii) if consumers with lower willingness to pay over-proportionally respond to promotional activity. When these conditions do not hold, independent distributors may actually supply more promotional services than integrated distributors.

Suggested Citation

  • Zenger Hans, 2012. "When Do Independent Distributors Undersupply Promotional Services?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-9, December.
    • Handle: RePEc:bpj:bejeap:v:12:y:2012:i:1:p:1-9:n:64
    DOI: 10.1515/1935-1682.3352
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    References listed on IDEAS

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    3. 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.
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