Vertical Restraints in the European Automobile Industry
New regulation for the EU automobile industry allows dealers to engage in multifranchise operation, a practice that formerly could be prohibited by the producers in this market. We argue that a likely consequence of thsi shift in regulatory regime is increased dealer concentration. This will tend to lower wholesale prices as producers must compete more intensely to get access to the dealers. On the other hand, dealers will gain local market power which tend to raise retail prices.
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