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The economic theory of quasi-exclusive territory

Author

Listed:
  • Daisuke Nikae

    (Osaka City University)

  • Takeshi Ikeda

    (Osaka City University)

Abstract

This paper introduces the economic theory of gquasi-exclusive territory. h We consider vertical dealings with two upstream firms and four downstream firms that compete in two separate markets. Under quasi- exclusive territory, downstream firms are bound to pay additional charges when selling goods beyond their territorial areas. We find that with respect to the two-part tariffs comprising a marginal price and a fixed fee, quasi-exclusive territory is more beneficial for upstream firms and more harmful for consumers than conventional exclusive territory. Moreover, we note that quasi-exclusive territory is in practice in various vertical dealings and that its regulation is a difficult task.

Suggested Citation

  • Daisuke Nikae & Takeshi Ikeda, 2005. "The economic theory of quasi-exclusive territory," Industrial Organization 0508002, EconWPA.
  • Handle: RePEc:wpa:wuwpio:0508002
    Note: Type of Document - pdf; pages: 12
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/0508/0508002.pdf
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    References listed on IDEAS

    as
    1. Barrie R. Nault & Albert S. Dexter, 1994. "Adoption, Transfers, and Incentives in a Franchise Network with Positive Externalities," Marketing Science, INFORMS, vol. 13(4), pages 412-423.
    2. G.F. Mathewson & R.A. Winter, 1984. "An Economic Theory of Vertical Restraints," RAND Journal of Economics, The RAND Corporation, vol. 15(1), pages 27-38, Spring.
    3. Jerzy Mycielski & Yohannes E. Riyanto & Filip Wuyts, 2000. "Inter- and Intraband Competition and the Manufacturer-Retailer Relationship," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 156(4), pages 599-599, December.
    4. Rey, Patrick & Tirole, Jean, 1986. "The Logic of Vertical Restraints," American Economic Review, American Economic Association, vol. 76(5), pages 921-939, December.
    5. Shantanu Dutta & Mark Bergen & George John, 1994. "The Governance of Exclusive Territories When Dealers can Bootleg," Marketing Science, INFORMS, vol. 13(1), pages 83-99.
    6. Alexander, Cindy R & Reiffen, David, 1995. "Vertical Contracts as Strategic Commitments: How Are They Enforced?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(4), pages 623-649, Winter.
    7. Lahiri, Sajal & Ono, Yoshiyasu, 1988. "Helping Minor Firms Reduces Welfare," Economic Journal, Royal Economic Society, vol. 98(393), pages 1199-1202, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Exclusive territory; Quasi-exclusive territory; Vertical dealings; Two-part tariff;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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