On the Welfare Effects of Exclusive Distribution Arrangements

14 Pages Posted: 26 Jun 2012  

Jürgen Eichberger

University of Heidelberg - Alfred Weber Institute for Economics

Frank Mueller-Langer

European Commission, Joint Research Center; Max Planck Institute for Innovation and Competition

Date Written: May 24, 2012

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.

Keywords: Exclusive distribution, Competing distribution, Vertical foreclosure, Cournot competition

Suggested Citation

Eichberger, Jürgen and Mueller-Langer, Frank, On the Welfare Effects of Exclusive Distribution Arrangements (May 24, 2012). Max Planck Institute for Intellectual Property & Competition Law Research Paper No. 12-07. Available at SSRN: https://ssrn.com/abstract=2069860 or http://dx.doi.org/10.2139/ssrn.2069860

Jürgen Eichberger

University of Heidelberg - Alfred Weber Institute for Economics ( email )

Heidelberg, D-69117
Germany

Frank Mueller-Langer (Contact Author)

European Commission, Joint Research Center

Seville
Spain

Max Planck Institute for Innovation and Competition ( email )

Munich
Germany

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