An Economic Theory of Vertical Restraints
Vertical restraints imposed by manufacturers on the prices, locations, and sales of retail firms represent a puzzling departure from the simple price-mediated exchange of conventional markets. In this article we analyze the theoretical basis for these restraints. In a setting where retailers inform...
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| Veröffentlicht in: | The Rand journal of economics 1984-04, Vol.15 (1), p.27-38 |
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| container_end_page | 38 |
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| container_title | The Rand journal of economics |
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| creator | Mathewson, G. F. Winter, R.A. |
| description | Vertical restraints imposed by manufacturers on the prices, locations, and sales of retail firms represent a puzzling departure from the simple price-mediated exchange of conventional markets. In this article we analyze the theoretical basis for these restraints. In a setting where retailers inform consumers and are imperfectly competitive, and where a manufacturer has some monopoly power, we identify three potential externalities affecting retailers' decisions. These externalities lead to the failure of simple uniform-price contracts to coordinate the incentives of retailers with the objective of maximizing combined manufacturer and retailer profits. We identify the packages of vertical restraints that are minimally sufficient, under various conditions, to neutralize the externalities and to achieve the joint-profit maximum. |
| doi_str_mv | 10.2307/3003667 |
| format | Article |
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F.</au><au>Winter, R.A.</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>An Economic Theory of Vertical Restraints</atitle><jtitle>The Rand journal of economics</jtitle><date>1984-04-01</date><risdate>1984</risdate><volume>15</volume><issue>1</issue><spage>27</spage><epage>38</epage><pages>27-38</pages><issn>0741-6261</issn><eissn>1756-2171</eissn><coden>RJECEA</coden><abstract>Vertical restraints imposed by manufacturers on the prices, locations, and sales of retail firms represent a puzzling departure from the simple price-mediated exchange of conventional markets. In this article we analyze the theoretical basis for these restraints. In a setting where retailers inform consumers and are imperfectly competitive, and where a manufacturer has some monopoly power, we identify three potential externalities affecting retailers' decisions. These externalities lead to the failure of simple uniform-price contracts to coordinate the incentives of retailers with the objective of maximizing combined manufacturer and retailer profits. We identify the packages of vertical restraints that are minimally sufficient, under various conditions, to neutralize the externalities and to achieve the joint-profit maximum.</abstract><cop>Mount Morris, Ill</cop><pub>The Rand Corporation</pub><doi>10.2307/3003667</doi><tpages>12</tpages></addata></record> |
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| identifier | ISSN: 0741-6261 |
| ispartof | The Rand journal of economics, 1984-04, Vol.15 (1), p.27-38 |
| issn | 0741-6261 1756-2171 |
| language | eng |
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| source | Jstor Complete Legacy; RePEc; Business Source Complete; Periodicals Index Online |
| subjects | Consumer prices Economic externalities Economic models Economic theory Fees Market equilibrium Market prices Monopolies Nash equilibrium Resale price maintenance Restraint Retail outlets Retail prices Retail stores Vertical Vertical integration Wholesale prices |
| title | An Economic Theory of Vertical Restraints |
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