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Equilibrium Distribution Systems Under Retailers' Strategic Behavior


  • José J. Sempere Monerris

    () (Universitat de València)

  • Rafael Moner Colonques

    () (Universitat de València)

  • Amparo Urbano

    (Universitat de València)


This paper investigates what are the equilibrium distribution systems in a successive duopoly when retailers hold the power to choose the number of products they wish to market. Since they both can be multi-product sellers, the number of possible channel structures considered is larger than in previous work. Then, we study whether the resulting distribution systems obtained in earlier papers still remain. In particular, whether there are incentives to adopt exclusive distribution agreements, whether a manufacturer is foreclosed from the market and, essentially, whether there exists, at equilibrium, enough inter and intra-brand competition. The analysis shows that provided low brand asymmetry, it is sufficient that retailers hold the power to choose the number of products they wish to distribute to obtain endogenously both inter and intra-brand competition; both retailers become multi-product sellers. However, as the profitability of brands diverges sufficiently, only the most profitable brand will be distributed by both retailers thus only arising intra-brand competition at equilibrium. Neither the exclusive distribution system nor a common distribution system analized in the previous literature appears at equilibrium.

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  • José J. Sempere Monerris & Rafael Moner Colonques & Amparo Urbano, 2001. "Equilibrium Distribution Systems Under Retailers' Strategic Behavior," Working Papers. Serie AD 2001-01, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  • Handle: RePEc:ivi:wpasad:2001-01

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    References listed on IDEAS

    1. B. Douglas Bernheim & Michael D. Whinston, 1998. "Exclusive Dealing," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 64-103, February.
    2. 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.
    3. Shaffer, Greg, 1991. "Capturing Strategic Rent: Full-Line Forcing, Brand Discounts, Aggregate Rebates, and Maximum Resale Price Maintenance," Journal of Industrial Economics, Wiley Blackwell, vol. 39(5), pages 557-575, September.
    4. B. Douglas Bernheim & Michael D. Whinston, 1985. "Common Marketing Agency as a Device for Facilitating Collusion," RAND Journal of Economics, The RAND Corporation, vol. 16(2), pages 269-281, Summer.
    5. 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.
    6. Bonanno, Giacomo & Vickers, John, 1988. "Vertical Separation," Journal of Industrial Economics, Wiley Blackwell, vol. 36(3), pages 257-265, March.
    7. Tommy Staahl Gabrielsen & Lars Sørgard, 1999. "Exclusive versus Common Dealership," Southern Economic Journal, Southern Economic Association, vol. 66(2), pages 353-366, October.
    8. Tommy Gabrielsen, 1996. "The foreclosure argument for exclusive dealing: The case of differentiated retailers," Journal of Economics, Springer, vol. 63(1), pages 25-40, February.
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    Cited by:

    1. José J. Sempere Monerris & Rafael Moner Colonques & Amparo Urbano, 2000. "Product Quality And Distribution Channels," Working Papers. Serie AD 2000-19, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    2. Igor Muraviev, 2007. "Equilibrium Configurations of Distribution Channels in Bilaterally Oligopolistic Industries," Working Papers hal-00243078, HAL.

    More about this item


    Distribution systems; retailer power.;

    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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