This lecture on vertical restraint is a transcript of a second-year MBA class at the Stephen M. Ross School of Business, University of Michigan. At various points, student comments and comments by Valerie Suslow, the co-teacher of this course, appear. Accompanying this lecture are the PowerPoint slides and a few film clips from the lecture.
The lecture begins with a discussion of vertical boundaries of the firm, and reasons why firms might want to vertically integrate. The bulk of the lecture, however, focuses on vertical restraints. After defining the different types of restraints found in manufacturer retailer contracts, the lecture covers the potential reasons â€“ both efficiency and anti-competitive arguments â€“ why these restraints are used. Finally, the lecture provides a short discussion of public policy towards these restraints, including their treatment under antitrust and various conflicting industry laws. This last section also contains a few examples of recent cases.