On the Welfare Effects of Exclusive Distribution Arrangements
Jürgen Eichberger and
Frank Mueller-Langer ()
MPRA Paper from University Library of Munich, Germany
The regulation of vertical relationships between firms is the subject of persistent legal and academic controversy. The literature studying vertical trade relationships seems to assume that an upstream monopolist prefers downstream competition over exclusive distribution arrangements. We derive precise conditions for when an upstream monopolist prefers competing distribution systems over exclusive distribution in the downstream market. We also show that the welfare effects of downstream competition are ambiguous. A downstream oligopoly may have negative welfare properties compared to a downstream monopoly.
Keywords: Exclusive distribution; Competing distribution; Vertical foreclosure; Cournot competition (search for similar items in EconPapers)
JEL-codes: F10 L42 D4 L12 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:39691
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