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Exclusive dealing and common agency in international markets

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  • Raff, Horst
  • Schmitt, Nicolas

Abstract

This paper investigates the contractual choice between exclusive dealing and common agency in a simple international oligopoly model where products are sold through intermediaries. We find that when trade barriers are high domestic firms tend to adopt exclusive dealing contracts, whereas trade liberalization may lead firms to choose common agency. Irrespective of the level of trade barriers, the equilibrium contract adopted by each manufacturer is shown to decrease domestic welfare as compared to the other possible contract when products are close substitutes.
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Suggested Citation

  • Raff, Horst & Schmitt, Nicolas, 2006. "Exclusive dealing and common agency in international markets," Journal of International Economics, Elsevier, vol. 68(2), pages 485-503, March.
  • Handle: RePEc:eee:inecon:v:68:y:2006:i:2:p:485-503
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    References listed on IDEAS

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    1. B. Douglas Bernheim & Michael D. Whinston, 1998. "Exclusive Dealing," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 64-103, February.
    2. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, December.
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    4. Fargeix, Andre & Perloff, Jeffrey M., 1989. "The effect of tariffs in markets with vertical restraints," Journal of International Economics, Elsevier, pages 99-117.
    5. Sadao Nagaoka & Akira Goto, 1997. "Vertical Restraints and Market Access," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 24(1), pages 21-36, January.
    6. Spencer, Barbara J & Qiu, Larry D, 2001. "Keiretsu and Relationship-Specific Investment: A Barrier to Trade?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 871-901, November.
    7. Raff, Horst & Schmitt, Nicolas, 2006. "Exclusive dealing and common agency in international markets," Journal of International Economics, Elsevier, pages 485-503.
    8. Marvel, Howard P, 1982. "Exclusive Dealing," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 1-25, April.
    9. Raff, Horst & Schmitt, Nicolas, 2005. "Endogenous vertical restraints in international trade," European Economic Review, Elsevier, vol. 49(7), pages 1877-1889, October.
    10. David Martimort, 1996. "Exclusive Dealing, Common Agency, and Multiprincipals Incentive Theory," RAND Journal of Economics, The RAND Corporation, pages 1-19.
    11. David Martimort, 1996. "Exclusive Dealing, Common Agency, and Multiprincipals Incentive Theory," RAND Journal of Economics, The RAND Corporation, pages 1-19.
    12. Comanor, William S & Frech, H E, III, 1985. "The Competitive Effects of Vertical Agreements?," American Economic Review, American Economic Association, vol. 75(3), pages 539-546, June.
    13. Mathewson, G Frank & Winter, Ralph A, 1987. "The Competitive Effects of Vertical Agreements: Comment," American Economic Review, American Economic Association, vol. 77(5), pages 1057-1062, December.
    14. Gene M. Grossman & Elhanan Helpman, 2002. "Integration versus Outsourcing in Industry Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 85-120.
    15. David Besanko & Martin K. Perry, 1993. "Equilibrium Incentives for Exclusive Dealing in a Differentiated Products Oligopoly," RAND Journal of Economics, The RAND Corporation, pages 646-668.
    16. Martin Richardson, 2004. "Trade Policy and Access to Retail Distribution," Review of International Economics, Wiley Blackwell, pages 676-688.
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    Citations

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    Cited by:

    1. Raff, Horst & Schmitt, Nicolas, 2009. "Buyer power in international markets," Journal of International Economics, Elsevier, vol. 79(2), pages 222-229, November.
    2. Horst Raff & Nicolas Schmitt, 2016. "Manufacturers and retailers in the global economy," Canadian Journal of Economics, Canadian Economics Association, vol. 49(2), pages 685-706, May.
    3. S. Bolatto & M. Grazzi & C. Tomasi, 2017. "Export intermediaries and adjustments to exchange rate movements," Working Papers wp2004, Dipartimento Scienze Economiche, Universita' di Bologna.
    4. Gabriel Felbermayr & Benjamin Jung, 2011. "Trade Intermediation and the Organization of Exporters," Review of International Economics, Wiley Blackwell, pages 634-648.
    5. Graham Mallard, 2014. "Static Common Agency And Political Influence: An Evaluative Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 28(1), pages 17-35, February.
    6. Carsten Eckel, 2009. "International Trade and Retailing," CESifo Working Paper Series 2597, CESifo Group Munich.
    7. Raff, Horst & Schmitt, Nicolas, 2006. "Exclusive dealing and common agency in international markets," Journal of International Economics, Elsevier, pages 485-503.
    8. Raff, Horst & Schmitt, Nicolas, 2006. "Exclusive dealing and common agency in international markets," Journal of International Economics, Elsevier, pages 485-503.
    9. Raff, Horst & Schmitt, Nicolas, 2015. "Retailing and international trade: A survey of the literature," Economics Working Papers 2015-02, Christian-Albrechts-University of Kiel, Department of Economics.
    10. Ganslandt, Mattias & Maskus, Keith E., 2007. "Vertical distribution, parallel trade, and price divergence in integrated markets," European Economic Review, Elsevier, pages 943-970.

    More about this item

    JEL classification:

    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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