Excessive Retailing at the Bertrand Equilibria

Esther Gal-Or ()

Canadian Journal of Economics, 1990, vol. 23, issue 2, pages 294-304

Abstract: In oligopolistic markets where competition is in prices, producers may prefer to be represented by agents that sell their products, even if those agents do not provide any direct services to promote the sale of the product and even if contracting is costly. Contracting with the agents serves as a medium to relieve competitive pressures in the product market. The benefit that a single firm derives from contracting is an increasing function of the number of firms that have already contracted with agents. Hence, if the contracting cost is relatively low, there exists a unique equilibrium where all firms contract with agents.

Date: 1990
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