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Exclusive Retailing

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Ruderer,  Dominik
MPI for Intellectual Property and Competition Law, Max Planck Society;

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Citation

Ruderer, D., & Masika, M. (2011). Exclusive Retailing.


Cite as: http://hdl.handle.net/11858/00-001M-0000-000F-9B13-3
Abstract
This paper studies the equilibrium incentives of an upstream manufacturer to adopt exclusive retailing (ER). ER eliminates disciplining intrabrand competition between retailers, gives the exclusive retailer market power and a higher retail margin. On the one hand, the additional margin gives the exclusive retailer larger incentives to invest in (procompetitive) brand-specific marketing. On the other hand, ER may serve as a (anticompetitive) commitment device for reduced interbrand competition and hence, higher prices and profits. Implications for competition policy are ambiguous. Whenever marketing investments play a prominent role or interbrand competition is rather tough, ER enhances welfare. Otherwise regulators should intervene.