Munich Personal RePEc Archive

On the Welfare Effects of Exclusive Distribution Arrangements

Eichberger, Jürgen and Mueller-Langer, Frank (2012): On the Welfare Effects of Exclusive Distribution Arrangements.

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Abstract

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.

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