Quasi-Partnerships in Distribution

26 Pages Posted: 4 Sep 2007 Last revised: 30 Sep 2009

See all articles by David E. Mills

David E. Mills

University of Virginia - Department of Economics

Date Written: 2007

Abstract

This paper concerns the sale of a vertically differentiated good by a manufacturer to retailers that have market power when reselling to consumers. The contractual relationships between the manufacturer and individual retailers are characterized as “quasi-partnerships,” reflecting the ongoing and multi-dimensional nature of such relationships. Contractual terms are predicted by the Nash bargaining solution and are distinguished from those in an ordinary bilateral monopoly because they make allowance for competing, vertically differentiated brands. The model predicts that differences in retailers’ ability to promote the manufacturer’s brand induce prices that vary systematically with the manufacturer’s market share of retailers’ sales.

Keywords: vertical relationships, pricing, market share discounts, distribution

JEL Classification: L11, L12, L22, L42, L81

Suggested Citation

Mills, David E., Quasi-Partnerships in Distribution (2007). Review of Industrial Organization, Vol. 31, No. 3, 2007. Available at SSRN: https://ssrn.com/abstract=1010953

David E. Mills (Contact Author)

University of Virginia - Department of Economics ( email )

P.O. Box 400182
Charlottesville, VA 22904-4182
United States

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