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Exclusive dealing and common agency in international markets

  • Raff, Horst
  • Schmitt, Nicolas

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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File URL: http://www.sciencedirect.com/science/article/B6V6D-4GYNYK0-1/2/7d3eb1476151a1c86022d5dc82f8f90f
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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 68 (2006)
Issue (Month): 2 (March)
Pages: 485-503

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Handle: RePEc:eee:inecon:v:68:y:2006:i:2:p:485-503
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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  1. David Martimort, 1996. "Exclusive Dealing, Common Agency, and Multiprincipals Incentive Theory," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 1-19, Spring.
  2. Fargeix, Andre & Perloff, Jeffrey M, 1987. "The effect of tariffs in markets with vertical restraints," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt49v754qw, Department of Agricultural & Resource Economics, UC Berkeley.
  3. Horst Raff & Nicolas Schmitt, 2004. "Exclusive Dealing and Common Agency in International Markets," CESifo Working Paper Series 1168, CESifo Group Munich.
  4. B. Douglas Bernheim & Michael D. Whinston, 1996. "Exclusive Dealing," NBER Working Papers 5666, National Bureau of Economic Research, Inc.
  5. Barbara J. Spencer & Larry D. Qiu, 2000. "Keiretsu and Relationship-Specific Investment: A Barrier to Trade?," NBER Working Papers 7572, National Bureau of Economic Research, Inc.
  6. Raff, Horst & Schmitt, Nicolas, 2005. "Endogenous vertical restraints in international trade," European Economic Review, Elsevier, vol. 49(7), pages 1877-1889, October.
  7. Sadao Nagaoka & Akira Goto, 1997. "Vertical Restraints and Market Access," Empirica, Springer, vol. 24(1), pages 21-36, January.
  8. Gene M. Grossman & Elhanan Helpman, 2002. "Integration Versus Outsourcing In Industry Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 85-120, February.
  9. Marvel, Howard P, 1982. "Exclusive Dealing," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 1-25, April.
  10. Comanor, William S & Frech, H E, III, 1985. "The Competitive Effects of Vertical Agreements?," American Economic Review, American Economic Association, vol. 75(3), pages 539-46, June.
  11. Martin Richardson, 2004. "Trade Policy and Access to Retail Distribution," Review of International Economics, Wiley Blackwell, vol. 12(4), pages 676-688, 09.
  12. Mathewson, G Frank & Winter, Ralph A, 1987. "The Competitive Effects of Vertical Agreements: Comment," American Economic Review, American Economic Association, vol. 77(5), pages 1057-62, December.
  13. repec:cup:cbooks:9780521816632 is not listed on IDEAS
  14. repec:cup:cbooks:9780521016919 is not listed on IDEAS
  15. David Besanko & Martin K. Perry, 1993. "Equilibrium Incentives for Exclusive Dealing in a Differentiated Products Oligopoly," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 646-668, Winter.
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