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On the Welfare Effects of Exclusive Distribution ArrangementsJürgen EichbergerUniversity of Heidelberg - Alfred Weber Institute for Economics Frank Mueller-LangerMax Planck Institute for Intellectual Property and Competition Law; International Max Planck Research School for Competition and Innovation (IMPRS-CI) May 24, 2012 Max Planck Institute for Intellectual Property & Competition Law Research Paper No. 12-07 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.
Number of Pages in PDF File: 14 Keywords: Exclusive distribution, Competing distribution, Vertical foreclosure, Cournot competition working papers seriesDate posted: June 26, 2012Suggested CitationContact Information
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