IDEAS home Printed from https://ideas.repec.org/a/tpr/jeurec/v4y2006i1p216-251.html
   My bibliography  Save this article

Liberalizing A Distribution System: The European Car Market

Author

Listed:
  • Randy Brenkers

    (Katholieke Universiteit Leuven.)

  • Frank Verboven

    (Katholieke Universiteit Leuven.)

Abstract

We quantify the competitive effects of liberalizing the selective and exclusive distribution system in the European car market, based on a model of oligopoly pricing with differentiated products. We consider two possible competitive effects from liberalization: (i) the creation of international intrabrand competition (cross-border trade), which will result in a reduction of international price discrimination; and (ii) a possible cumulative effect arising from a strengthening of national intrabrand competition, which would result in reduced double marginalization. We find that the reduction in international price discrimination mainly redistributes consumer gains across countries; it has a positive but modest effect on total welfare. If liberalization also has the cumulative effect of reducing double marginalization, the welfare effects are much higher. Finally, we find that the effects of liberalization on the manufacturers' profits are either small or positive. This finding implies that international price discrimination, and softening competition through a double marginalization mechanism, should not be interpreted as main profit motives for the previous distribution system, but only as unintended side effects. Hence, the industry rationale for maintaining the previous distribution system should be sought in other areas. (JEL: F15, L42) Copyright (c) 2006 by the European Economic Association.

Suggested Citation

  • Randy Brenkers & Frank Verboven, 2006. "Liberalizing A Distribution System: The European Car Market," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 216-251, March.
  • Handle: RePEc:tpr:jeurec:v:4:y:2006:i:1:p:216-251
    as

    Download full text from publisher

    File URL: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1542-4774/issues
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xiao, Junji & Ju, Heng, 2016. "The determinants of dealership structure: Empirical analysis of the Chinese auto market," Journal of Comparative Economics, Elsevier, vol. 44(4), pages 961-981.
    2. Hellerstein, Rebecca & Villas-Boas, Sofia B., 2010. "Outsourcing and pass-through," Journal of International Economics, Elsevier, vol. 81(2), pages 170-183, July.
    3. repec:eee:eecrev:v:100:y:2017:i:c:p:1-27 is not listed on IDEAS
    4. repec:eee:inecon:v:110:y:2018:i:c:p:87-102 is not listed on IDEAS
    5. Noton, Carlos, 2016. "Structural estimation of price adjustment costs in the European car market," International Journal of Industrial Organization, Elsevier, vol. 49(C), pages 105-147.
    6. Jorge, Sí­lvia Ferreira & Pires, Cesaltina Pacheco, 2008. "Delivered versus mill nonlinear pricing with endogenous market structure," International Journal of Industrial Organization, Elsevier, vol. 26(3), pages 829-845, May.
    7. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, March.
    8. Tran, Tat Thanh & Zikos, Vasileios, 2017. "R&D networks among suppliers and manufacturers," Economic Modelling, Elsevier, vol. 60(C), pages 151-161.
    9. A. Auer, Raphael & Chaney, Thomas & Sauré, Philip, 2018. "Quality pricing-to-market," Journal of International Economics, Elsevier, vol. 110(C), pages 87-102.
    10. González, Eduardo & Cárcaba, Ana & Ventura, Juan, 2015. "How car dealers adjust prices to reach the product efficiency frontier in the Spanish automobile market," Omega, Elsevier, vol. 51(C), pages 38-48.
    11. Milliou, Chrysovalantou & Petrakis, Emmanuel, 2007. "Upstream horizontal mergers, vertical contracts, and bargaining," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 963-987, October.
    12. Adachi, Takanori & Ebina, Takeshi, 2014. "Double marginalization and cost pass-through: Weyl–Fabinger and Cowan meet Spengler and Bresnahan–Reiss," Economics Letters, Elsevier, vol. 122(2), pages 170-175.

    More about this item

    JEL classification:

    • F00 - International Economics - - General - - - General
    • L00 - Industrial Organization - - General - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:jeurec:v:4:y:2006:i:1:p:216-251. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kristin Waites). General contact details of provider: http://www.mitpressjournals.org/jeea .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.