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The Manufacturers’ Choice of Brand Policy under Successive Duopoly

Author

Listed:
  • Rafael MONER-COLONQUES

    (University of Valencia)

  • José J. SEMPERE-MONERRIS

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and University of Valencia)

  • Amparo URBANO

    (University of Valencia)

Abstract

We propose a non-cooperative game in order to emphasize the srategic rationale in shaping the distribution system. Compared with the received literature, we let manufacturers select which retailer(s) will market their respective brand. This, together with retailers possibly being multi-product dealers, enlarges the set of distribution systems. Whether manufacturers employ two retailers rather than one reflects the tradeoff between two conflicting efects, there is an output incease but more competition is established. High levels of product differentiation and not too large brand asymmetry are enough to incentive manufacturers introduce intra-band competition. However, the well-known exclusive dealing system shows up for little product differentiation and low brand asymmetry. It is worth emphasizing that, if any type of exclusivity relationship ever occurs, it is the equiibrium outcome of a non-cooperative game in which neither manufacturers nor retailers may impose any vertical clauses.

Suggested Citation

  • Rafael MONER-COLONQUES & José J. SEMPERE-MONERRIS & Amparo URBANO, 2002. "The Manufacturers’ Choice of Brand Policy under Successive Duopoly," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002003, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:2002003
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    File URL: http://sites.uclouvain.be/econ/DP/IRES/2002-3.pdf
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    References listed on IDEAS

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    1. Saggi, Kamal & Vettas, Nikolaos, 2002. "On intrabrand and interbrand competition: The strategic role of fees and royalties," European Economic Review, Elsevier, vol. 46(1), pages 189-200, January.
    2. B. Douglas Bernheim & Michael D. Whinston, 1998. "Exclusive Dealing," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 64-103, February.
    3. Rysman, Marc, 2001. "How many franchises in a market?," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 519-542, March.
    4. Besanko, David & Perry, Martin K., 1994. "Exclusive dealing in a spatial model of retail competition," International Journal of Industrial Organization, Elsevier, vol. 12(3), pages 297-329, September.
    5. Tommy Staahl Gabrielsen & Lars Sørgard, 1999. "Exclusive versus Common Dealership," Southern Economic Journal, Southern Economic Association, vol. 66(2), pages 353-366, October.
    6. Daniel P. O'Brien & Greg Shaffer, 1997. "Nonlinear Supply Contracts, Exclusive Dealing, and Equilibrium Market Foreclosure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(4), pages 755-785, December.
    7. Lin, Y Joseph, 1990. "The Dampening-of-Competition Effect of Exclusive Dealing," Journal of Industrial Economics, Wiley Blackwell, vol. 39(2), pages 209-223, December.
    8. Bonanno, Giacomo & Vickers, John, 1988. "Vertical Separation," Journal of Industrial Economics, Wiley Blackwell, vol. 36(3), pages 257-265, March.
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    Cited by:

    1. Mauleon, Ana & Sempere-Monerris, Jose J. & Vannetelbosch, Vincent J., 2011. "Networks of manufacturers and retailers," Journal of Economic Behavior & Organization, Elsevier, vol. 77(3), pages 351-367, March.

    More about this item

    Keywords

    Brand Policy; Distribution Systems; Intra-band Competition;

    JEL classification:

    • L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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