Endogenous Vertical Restraints In International Trade
Christian-Albrechts-Universitaet zu Kiel; CESifo (Center for Economic Studies and Ifo Institute); Kiel Institute for the World Economy
Simon Fraser University; CESifo (Center for Economic Studies and Ifo Institute)
CESifo Working Paper Series No. 284
this paper examines interbrand competition between a domestic and a foreign manufacturer who market their products through intermediaries. the contracts manufacturers offer these intermediaries are endogenous. in equilibrium contracts may specify exclusive territories (et), depending on the degree of substitutability between products and the level and degree of transparency of trade barriers. trade liberalization, through lower or more transparent barriers, may lead manufacturers to use et, thereby substituting private anti-competitive arrangements for government-imposed barriers. this substitution may decrease competition and welfare, and thus create a role for competition policy in a freer trade environment.
Number of Pages in PDF File: 39
JEL Classification: F13, L42
Date posted: March 22, 2001