When do Independent Distributors Undersupply Promotional Services?

B.E. Journal of Economic Analysis & Policy, Vol. 12, No. 1, pp. 1-7, 2012

9 Pages Posted: 14 Nov 2012 Last revised: 17 Feb 2013

See all articles by Hans Zenger

Hans Zenger

European Union - Directorate General for Competition

Date Written: November 13, 2012

Abstract

In antitrust practice, it is often argued that independent distributors of goods have an incentive to undersupply brand-specific promotional services compared to a vertically integrated supplier. This paper outlines the conditions under which this claim is correct. Independent distributors have lower incentives to engage in promotion if economies of scale exist in the provision of promotional services and if consumers with lower willingness to pay overproportionally respond to promotional activity. When these conditions do not hold, independent distributors may actually supply more promotional services than integrated distributors.

Keywords: service provision, independent distributors, vertical integration, double marginalization

JEL Classification: L12, L15, L22, D4

Suggested Citation

Zenger, Hans, When do Independent Distributors Undersupply Promotional Services? (November 13, 2012). B.E. Journal of Economic Analysis & Policy, Vol. 12, No. 1, pp. 1-7, 2012, Available at SSRN: https://ssrn.com/abstract=2174916

Hans Zenger (Contact Author)

European Union - Directorate General for Competition ( email )

Place Madou, Madouplein 1
Saint-Josse-ten-Noode/Sint-Joost-ten-Noode
Brussels, B-1049
Belgium

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