Trade liberalization in vertically related markets

José J. Sempere Monerris (), Rafael Moner Colonques () and Amparo Urbano
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José J. Sempere Monerris: Universitat de València
Rafael Moner Colonques: Universitat de València
Authors registered in the RePEc Author Service: José J. Sempere-Monerris

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: This paper looks into the desirability of trade liberalization for manufacturers, retailers and consumers. The analysis compares the move from the autarky situation to either one of free trade that entails a change in the distribution system or not. We also examine whether the interests of manufacturers and retailers about the preferred distribution system coincide, provided trade opens. We find that market integration is beneficial to all agents only under certain conditions on the degree of market asymmetry and the degree of product differentiation. Interestingly, if integration entails a change in the distribution system, the conflict between manufacturers and retailers strengthens since only retailers prefer free trade when markets are not too asymmetric and when interbrand competition is sufficiently strong. Furthermore, consumers can be harmed by trade and, in a setting without exclusivities, one country may experience a welfare decrease. Finally, the analysis of the strategic choice concerning exclusivity clauses uncovers that retailers and manufacturers never agree about their preference for endogenous distribution systems.

Keywords: International competition; vertical relationships. (search for similar items in EconPapers)
JEL-codes: F12 L19 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2010-03
New Economics Papers: this item is included in nep-com and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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