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Vertical Restraints and Horizontal Control

  • Hamilton, Stephen F.
  • Innes, Robert

This paper considers vertical restraints in a multi-market retail setting in which each retailer sells the complete line of manufactured goods. Vertical restraints by one manufacturer on the retailers of its product serve as an instrument to exert horizontal control over the retail price of a rival manufactured good. Applications are developed for supermarket retailing, where the manufacturer of a national brand sold at both supermarkets can employ vertical restraints to control the pricing of the retailer’'s competing private labels, and for the personal computer industry, where the manufacturer of an essential computer component can use vertical restraints to control the pricing of complementary components bundled with the essential component by original equipment manufacturers (OEMs).

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Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2006 Annual meeting, July 23-26, Long Beach, CA with number 21424.

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Date of creation: 2006
Date of revision:
Handle: RePEc:ags:aaea06:21424
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  1. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
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  8. Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Wiley Blackwell, vol. 43(2), pages 217-35, June.
  9. Bolton, Patrick & Bonanno, Giacomo, 1988. "Vertical Restraints in a Model of Vertical Differentiation," The Quarterly Journal of Economics, MIT Press, vol. 103(3), pages 555-70, August.
  10. Lal, Rajiv & Matutes, Carmen, 1994. "Retail Pricing and Advertising Strategies," The Journal of Business, University of Chicago Press, vol. 67(3), pages 345-70, July.
  11. Economides, N., 2001. "The Microsoft Antitrust Case," New York University, Leonard N. Stern School Finance Department Working Paper Seires 01-00, New York University, Leonard N. Stern School of Business-.
  12. Daniel P. O'Brien & Greg Shaffer, 1992. "Vertical Control with Bilateral Contracts," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 299-308, Autumn.
  13. Klein, Benjamin & Murphy, Kevin M, 1988. "Vertical Restraints as Contract Enforcement Mechanisms," Journal of Law and Economics, University of Chicago Press, vol. 31(2), pages 265-97, October.
  14. Bruce W. Marion, 1998. "Changing power relationships in US food industry: Brokerage arrangements for private label products," Agribusiness, John Wiley & Sons, Ltd., vol. 14(2), pages 85-93.
  15. Carbajo, Jose & de Meza, David & Seidmann, Daniel J, 1990. "A Strategic Motivation for Commodity Bundling," Journal of Industrial Economics, Wiley Blackwell, vol. 38(3), pages 283-98, March.
  16. Innes, Robert & Hamilton, Stephen F., 2006. "Naked slotting fees for vertical control of multi-product retail markets," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 303-318, March.
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