The iPhone Goes Downstream: Mandatory Universal Distribution∗

Larry Karp and Jeffrey Perloff

Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

Abstract: Apple’s original decision to market iPhones using a single downstream vendor prompted calls for mandatory universal distribution (MUD), whereby all downstream vendors would sell the iPhone under the same contract terms. The upstream monopoly may want eitherone or more downstream vendors, and, in either case, consumer welfare may be higher with either one or more firms. If the income elasticity of demand for the new good is greater than the income elasticity of the existing generic good, the MUD requirements leads to a higherequilibrium price for both the new good and the generic, and therefore lowers consumer welfare.

Keywords: Social and Behavioral Sciences; vertical restrictions; mandatory universal distribution; new product oligopoly (search for similar items in EconPapers)
Date: 2011-12-15
New Economics Papers: this item is included in nep-bec and nep-com
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