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Two Tales on Resale

39 Pages Posted: 17 Dec 2007  

Felix Höffler

WHU - Otto Beisheim School of Management

Klaus M. Schmidt

Ludwig Maximilian University of Munich - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2007

Abstract

In some markets vertically integrated firms sell directly to final customers but also to independent downstream firms with whom they then compete on the downstream market. It is often argued that resellers intensify competition and benefit consumers, in particular when wholesale prices are regulated. However, we show that (i) resale may increase prices and make consumers worse off and that (ii) standard "retail minus X regulation" may increase prices and harm consumers. Our analysis suggests that this is more likely if the number of integrated firms is small, the degree of product differentiation is low, and/or if competition is spatial.

Keywords: Resale regulation, wholesale, spatial product differentiation, non-spatial product

Suggested Citation

Höffler, Felix and Schmidt, Klaus M., Two Tales on Resale (March 2007). MPI Collective Goods Preprint Paper No. 2007/16. Available at SSRN: https://ssrn.com/abstract=1075023 or http://dx.doi.org/10.2139/ssrn.1075023

Felix Höffler (Contact Author)

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Klaus M. Schmidt

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Ludwig Maximilian University of Munich - Faculty of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany
+49 89 2180 3405 (Phone)
+49 89 2180 3510 (Fax)

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