Two Tales on Resale

39 Pages Posted: 22 May 2008

See all articles by Felix Höffler

Felix Höffler

WHU - Otto Beisheim School of Management

Klaus M. Schmidt

Ludwig Maximilian University of Munich (LMU) - 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: April 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: non-spatial product differentiation, resale regulation, spatial product differentiation, vertical restraints, wholesale

JEL Classification: D43, L11, L42, L51

Suggested Citation

Höffler, Felix and Schmidt, Klaus M., Two Tales on Resale (April 2007). CEPR Discussion Paper No. DP6248, Available at SSRN: https://ssrn.com/abstract=1135486

Felix Höffler

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Klaus M. Schmidt (Contact Author)

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

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

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)

London
United Kingdom

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