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Capacity restriction by retailers

Author

Listed:
  • Ramón Faulí-Oller

    (Universidad de Alicante)

Abstract

A monopolist retailer facing two suppliers producing two symmetric and independent goods improves its bargaining position by commiting to sell only one good. We analyze if this advantage extends to the case where there are two undierentiated retailers competing in the same market. With linear supply contracts, we have partial capacity restriction in the sense that only one retailer commits to sell only one good. Then, we have that if retailers were to merge, welfare would decrease because the merger reduces the variety of goods available to consumers.

Suggested Citation

  • Ramón Faulí-Oller, 2008. "Capacity restriction by retailers," Working Papers. Serie AD 2008-02, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2008-02
    as

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2008-02.pdf
    File Function: Fisrt version / Primera version, 2008
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    References listed on IDEAS

    as
    1. Varian, Hal R, 1981. "A Model of Sales: Errata," American Economic Review, American Economic Association, vol. 71(3), pages 517-517, June.
    2. Dana, James D., 2012. "Buyer groups as strategic commitments," Games and Economic Behavior, Elsevier, vol. 74(2), pages 470-485.
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    Cited by:

    1. Chrysovalantou Milliou & Joel Sandonis, 2018. "Manufacturer Mergers and Product Variety in Vertically Related Markets," Journal of Industry, Competition and Trade, Springer, vol. 18(1), pages 1-24, March.
    2. Vadym Lepetyuk & Christian A. Stoltenberg, 2013. "Policy Announcements and Welfare," Economic Journal, Royal Economic Society, vol. 123, pages 962-997, September.

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    Keywords

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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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