IDEAS home Printed from https://ideas.repec.org/a/eee/eecrev/v32y1988i2-3p561-568.html
   My bibliography  Save this article

Vertical restraints and producers' competition

Author

Listed:
  • Rey, Patrick
  • Stiglitz, Joseph

Abstract

This paper examines the rationale for vertical restraints. It shows that there are important circumstances under which these restrictions have significant anti-competitive effects. The paper focuses on the consequences of exclusive territorial arrangements among the retailers of two products which are imperfect substitutes. Such arrangements are shown to increase consumer prices; under plausible conditions the increase in consumer prices is sufficiently large to more than offset the deleterious effects from "double marginalization" resulting from reduced competition among retailers. The imposition of exclusivity provisions is may be part of a Nash equilibrium among producers. These results hold whether there are or are not franchise fees.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Rey, Patrick & Stiglitz, Joseph, 1988. "Vertical restraints and producers' competition," European Economic Review, Elsevier, vol. 32(2-3), pages 561-568, March.
    • Handle: RePEc:eee:eecrev:v:32:y:1988:i:2-3:p:561-568
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/0014-2921(88)90203-6
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rey, Patrick & Vergé, Thibaud, 2016. "Secret contracting in multilateral relations," TSE Working Papers 16-744, Toulouse School of Economics (TSE), revised Dec 2020.
    2. Lømo, Teis Lunde & Meland, Frode & Sandvik, Håvard Mork, 2020. "Do slotting allowances reduce product variety?," Working Papers in Economics 7/20, University of Bergen, Department of Economics.
    3. Sexton, Richard J., 1991. "Game Theory: A Review With Applications To Vertical Control In Agricultural Markets," Working Papers 225865, University of California, Davis, Department of Agricultural and Resource Economics.
    4. Matthias Hunold & Johannes Muthers, 2017. "Resale price maintenance and manufacturer competition for retail services," RAND Journal of Economics, RAND Corporation, vol. 48(1), pages 3-23, March.
    5. Greg Shaffer & Florian Zettelmeyer, 2004. "Advertising in a Distribution Channel," Marketing Science, INFORMS, vol. 23(4), pages 619-628, November.
    6. Patrick Rey & Joseph Stiglitz, 1995. "The Role of Exclusive Territories in Producers' Competition," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 431-451, Autumn.
    7. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899.
    8. Vibhanshu Abhishek & Kinshuk Jerath & Z. John Zhang, 2016. "Agency Selling or Reselling? Channel Structures in Electronic Retailing," Management Science, INFORMS, vol. 62(8), pages 2259-2280, August.
    9. Kai-Uwe Kuhn, 1997. "Nonlinear Pricing in Vertically Related Duopolies," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 37-62, Spring.
    10. Choi, Kangsik & Lee, DongJoon, 2017. "Welfare-improving vertical separation with network externality," Economics Letters, Elsevier, vol. 151(C), pages 115-118.
    11. Sexton, Richard J., 1993. "Noncooperative Game Theory: A Review with Potential Applications to Agricultural Markets," Research Reports 25183, University of Connecticut, Food Marketing Policy Center.
    12. De los Santos, Babur & Kim, In Kyung & Lubensky, Dmitry, 2018. "Do MSRPs decrease prices?," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 429-457.
      • Babur De los Santos & In Kyung Kim & Dmitry Lubensky, 2013. "Do MSRPs Decrease Prices?," Working Papers 2013-13, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    13. Allain, Marie-Laure & Avignon, Rémi & Chambolle, Claire, 2020. "Purchasing alliances and product variety," International Journal of Industrial Organization, Elsevier, vol. 73(C).
    14. Bryan Caplan & Edward Stringham, 2003. "Networks, Law, and the Paradox of Cooperation," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 16(4), pages 309-326, December.
    15. 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.
    16. Anthony Dukes & Lin Liu, 2016. "Online Shopping Intermediaries: The Strategic Design of Search Environments," Management Science, INFORMS, vol. 62(4), pages 1064-1077, April.
    17. Jakub Kastl & David Martimort & Salvatore Piccolo, 2009. ""When Should Manufacturers Want Fair Trade?": New Insights from Asymmetric Information," CSEF Working Papers 218, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 08 Apr 2010.
    18. Sengupta, Rajdeep, 2007. "Foreign entry and bank competition," Journal of Financial Economics, Elsevier, vol. 84(2), pages 502-528, May.
    19. Rennhoff Adam, 2008. "Paying for Shelf Space: An Investigation of Merchandising Allowances in the Grocery Industry," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 6(1), pages 1-40, October.
    20. Babur De los Santos & Matthijs R. Wildenbeest, 2017. "E-book pricing and vertical restraints," Quantitative Marketing and Economics (QME), Springer, vol. 15(2), pages 85-122, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:32:y:1988:i:2-3:p:561-568. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eer .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.