Vertical restraints and horizontal control

Robert Innes and Stephen F. Hamilton ()

RAND Journal of Economics, 2009, vol. 40, issue 1, pages 120-143

Abstract: This article considers vertical restraints in a setting in which duopoly retailers each sell more than one manufactured good. Vertical restraints by a dominant manufacturer enable the firm to acquire horizontal control over a competitively supplied retail good. The equilibrium contracts produce symptoms that are consistent with a variety of observed retail practices, including slotting fees paid to retailers by competitive suppliers, loss leadership, and predatory accommodation with below-cost manufacturer pricing for the dominant brand(s). Applications are developed for supermarket retailing, where the manufacturer of a national brand seeks to control the retail pricing of a supermarket's private label, and for convenience stores, where a gasoline provider seeks to control the retail pricing of an in-store composite consumption good. Copyright (c) 2009, RAND.

Date: 2009

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Working Paper: Vertical Restraints and Horizontal Control (2006)
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