Product Differentiation and the Equilibrium Structure of the Manufacturer-Retailer Relationship

In this paper, we analyse the manufacturers' choice of vertical arrangement with retailers. We focus on two types of vertical arrangements namely exclusive dealing and exclusive territory. Both are used by manufacturers as instruments to dampen manufacturer competition. Exclusive dealing is used to avoid a head-to-head competition with other brands within a retail outlet. Thus, it restricts interbrand competition. Exclusive territory is used to eliminate intrabrand competition. Our results show that the choice of vertical arrangement depends on the degree of product substitution. When products are less subsitutable, in other words the interbrand rivalry is weak, manufacturers prefer to sell the products to a large number of competitive retailers. When the interbrand rivalry is strong, exclusive territory with exclusive dealing might be adopted by manufacturers. We derive welfare and antitrust policy implications.

On the Interaction between Taste and Distance and Its Implications on the Vertical Distribution Arrangement

This paper studies the vertical distribution arrangement between manufacturers and retailers in a two dimensional horizontal product differentiation framework. Products are differentiated along consumers' taste and retailers' location. Consumers have to incur transportation costs to visit a retailer and substitution costs to substitute their preferred products with the available products. The objective of the paper is to analyse the incentive of manufacturers to impose an exclusive territory restriction. We employ a four-stage game. In the first stage manufacturers decide on the optimal number of retailers. In the second stage manufacturers decide on the wholesale prices. In the third stage retailers set the retail prices. Finally, in the fourth stage consumers purchase goods. We show that the relative magnitude of the transportation and substitution costs is crucial in determining the decision of manufacturers to impose an exclusive territory restriction.

Hereditarily finite sets and identity trees

AbstractSome asymptotic results about the sizes of certain sets of hereditarily finite sets, identity trees, and finite games are proven

Euro and Trade Flows in Central Europe

In this paper we estimate the trade effects of the euro adoption in Central European countries using a modified gravity model. In particular, we analyze the ex post implications of accession of Slovenia and Slovakia to the Eurozone. We employ a gravity model that controls for an extended set of trade theory and policy variables. Trade theory variables include both the country size and factor proportion variables. Trade policy variables include the membership in GATT/WTO, CEFTA, OECD, EU and Europe Agreements.  The gravity model is estimated using the panel data approach on a sample of CEE countries trading with the rest of the world during the period 1992-2009 using the fixed effects, random effects and Hausman-Taylor estimators. It seems that elimination of exchange rate volatility resulted in trade expansion for the CEE countries but the accession to the Eurozone did not have any significant effects on exports of Slovakia and Slovenia

Social Development and International Trade in Central Europe

In this paper we study the impact of social development on international trade in Central and Eastern Europe using the generalized gravity model. Many previous empirical studies which explored the determinants of trade flows, concentrated only on traditional gravity variables, such as the size of trading partners, factor abundance, technology differences or distance. In our study, in addition to the standard set of gravity variables, we examine the role of aggregate social development indicators such as Human Development Index and its components. Our results show that both aggregate and disaggregate measures of social development affect the volume of international trade flows. In particular, the education indexes seem to be positively related to bilateral trade flows