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On the Welfare Effects of Exclusive Distribution Arrangements

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  • Eichberger, Jürgen
  • Mueller-Langer, Frank

Abstract

The regulation of vertical relationships between firms is the subject of persistent legal and academic controversy. The literature studying vertical trade relationships seems to assume that an upstream monopolist prefers downstream competition over exclusive distribution arrangements. We derive precise conditions for when an upstream monopolist prefers competing distribution systems over exclusive distribution in the downstream market. We also show that the welfare effects of downstream competition are ambiguous. A downstream oligopoly may have negative welfare properties compared to a downstream monopoly.

Suggested Citation

  • Eichberger, Jürgen & Mueller-Langer, Frank, 2012. "On the Welfare Effects of Exclusive Distribution Arrangements," MPRA Paper 39691, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:39691
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    File URL: https://mpra.ub.uni-muenchen.de/39691/1/MPRA_paper_39691.pdf
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    References listed on IDEAS

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    7. Martin Richardson, 2017. "Trade Policy and Access to Retail Distribution," World Scientific Book Chapters, in: Dimensions of Trade Policy, chapter 12, pages 243-262, World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

    1. Frank Mueller-Langer, 2014. "Copyright and parallel trade," Chapters, in: Richard Watt (ed.), Handbook on the Economics of Copyright, chapter 16, pages 287-310, Edward Elgar Publishing.

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    More about this item

    Keywords

    Exclusive distribution; Competing distribution; Vertical foreclosure; Cournot competition;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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