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Excessive Retailing at the Bertrand Equilibria

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  • Esther Gal-Or

Abstract

In oligopolistic markets where competition is in prices, producers may prefer to be represented by agents that sell their products, even if those agents do not provide any direct services to promote the sale of the product and even if contracting is costly. Contracting with the agents serves as a medium to relieve competitive pressures in the product market. The benefit that a single firm derives from contracting is an increasing function of the number of firms that have already contracted with agents. Hence, if the contracting cost is relatively low, there exists a unique equilibrium where all firms contract with agents.

Suggested Citation

  • Esther Gal-Or, 1990. "Excessive Retailing at the Bertrand Equilibria," Canadian Journal of Economics, Canadian Economics Association, vol. 23(2), pages 294-304, May.
  • Handle: RePEc:cje:issued:v:23:y:1990:i:2:p:294-304
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    Cited by:

    1. Bello, Alejandro & Cavero, Sandra, 2008. "The Spanish retail petroleum market: New patterns of competition since the liberalization of the industry," Energy Policy, Elsevier, vol. 36(2), pages 612-626, February.
    2. Elpiniki Bakaouka & Chrysovalantou Milliou, 2016. "Vertical Licensing, Input Pricing, and Entry," DEOS Working Papers 1605, Athens University of Economics and Business.
    3. Jansen, Jos, 2003. "Coexistence of strategic vertical separation and integration," International Journal of Industrial Organization, Elsevier, vol. 21(5), pages 699-716, May.
    4. B├╝hler, Stefan & Schmutzler, Armin, 2003. "Who Integrates?," CEPR Discussion Papers 4066, C.E.P.R. Discussion Papers.
    5. Stefania Borla, "undated". "Horizontal and Vertial Integration in the Presence of Research Spillovers," Discussion Papers 04/12, Department of Economics, University of York.

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