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Endogenous Vertical Restraints in International Trade

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Author Info
Horst Raff () (Institut für Volkswirtschaftslehre (Department of Economics) Christian-Albrechts-Universität)
Nicolas Schmitt () (Simon Fraser University)

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Abstract

This paper examines interbrand competition between a domestic and a foreign manufacturer who market their products through intermediaries. The contracts manufacturers offer these intermediaries are endogenous. In equilibrium, contracts may specify exclusive territories (ET), depending on the degree of substitutability between products and the level and degree of transparency of trade barriers. Trade liberalization, through lower or more transparent barriers, may lead manufacturers to use ET, thereby substituting private anti-competitive arrangements for government-imposed barriers. This substitution may decrease competition and welfare, and thus create a role for competition policy in a free trade environment.

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File URL: http://www.econ.sfu.ca/research/RePEc/sfu/sfudps/dp00-04.pdf
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Publisher Info
Paper provided by Department of Economics, Simon Fraser University in its series Discussion Papers with number dp00-04.

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Length: 41 pages
Date of creation: 2000
Date of revision: Feb 2000
Handle: RePEc:sfu:sfudps:dp00-04

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Postal: Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. repec:fth:michin:337 is not listed on IDEAS
  2. Levinsohn, J., 1994. "Competition Policy and International Trade," Working Papers 362, Research Seminar in International Economics, University of Michigan.
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  3. Fargeix, Andre & Perloff, Jeffrey M., 1989. "The effect of tariffs in markets with vertical restraints," Journal of International Economics, Elsevier, vol. 26(1-2), pages 99-117, February. [Downloadable!] (restricted)
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  4. Richardson, Martin, 1999. "Trade and Competition Policies: Concordia Discors?," Oxford Economic Papers, Oxford University Press, vol. 51(4), pages 649-64, October.
  5. Gallini, Nancy T. & Hollis, Aidan, 1999. "A contractual approach to the gray market," International Review of Law and Economics, Elsevier, vol. 19(1), pages 1-21, March. [Downloadable!] (restricted)
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  6. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-48, June. [Downloadable!] (restricted)
  7. Saxonhouse, Gary R, 1993. "What Does Japanese Trade Structure Tell Us about Japanese Trade Policy?," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 21-43, Summer. [Downloadable!] (restricted)
  8. Henrik Horn & James Levinsohn, 1997. "Merger Policies and Trade Liberalization," NBER Working Papers 6077, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Joseph F. Francois & Henrik Horn, 1998. "Competition Policy in an Open Economy," Tinbergen Institute Discussion Papers 98-092/2, Tinbergen Institute. [Downloadable!]
  10. Holmstrom, Bengt & Myerson, Roger B, 1983. "Efficient and Durable Decision Rules with Incomplete Information," Econometrica, Econometric Society, vol. 51(6), pages 1799-819, November. [Downloadable!] (restricted)
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  11. repec:fth:michin:362 is not listed on IDEAS
  12. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June. [Downloadable!] (restricted)
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  13. Martin Richardson, . "Trade Policy and Access to Retail Distribution," EPRU Working Paper Series 97-23, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
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  14. Massimo Motta & Fabrizio Onida, 1997. "Trade Policy and Competition Policy," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 56(1-2), pages 67-97, June.
  15. Saxonhouse, G.R., 1993. "What Does Japanese Trade Structure Tell Us about Japanese Trade Policy?," Working Papers 337, Research Seminar in International Economics, University of Michigan.
  16. Sadao Nagaoka, 1998. "International Trade Aspects of Competition Policy," NBER Working Papers 6720, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  17. Keith Head & John Ries, 1997. "International Mergers and Welfare under Decentralized Competition Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 1104-23, November. [Downloadable!] (restricted)
  18. Gal-Or, Esther, 1991. "Duopolistic vertical restraints," European Economic Review, Elsevier, vol. 35(6), pages 1237-1253, August. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Yongmin Chen & Jota Ishikawa & Zhihao Yu, 2002. "Trade Liberalization and Strategic Outsourcing," Carleton Economic Papers 02-12, Carleton University, Department of Economics. [Downloadable!]
    Other versions:
  2. Ganslandt, Mattias & Maskus, Keith E., 2007. "Wholesale Price Discrimination and Parallel Imports," Working Paper Series 702, Research Institute of Industrial Economics. [Downloadable!]
    Other versions:
  3. Horst Raff & Nicolas Schmitt, 2004. "Exclusive Dealing and Common Agency in International Markets," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  4. Horst Raff & Nicolas Schmitt, 2008. "Buyer Power in International Markets," Kiel Working Papers 1431, Kiel Institute for the World Economy. [Downloadable!]
    Other versions:
  5. Ganslandt, Mattias & Maskus, Keith E., 2005. "Vertical Distribution, Parallel Trade, and Price Divergence in Integrated Markets," Working Paper Series 639, Research Institute of Industrial Economics. [Downloadable!]
    Other versions:
  6. Carsten Eckel, 2009. "International Trade and Retailing," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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