Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Tuesday, March 11, 2014

Raising Retailers’ Profits: On Vertical Practices and the Exclusion of Rivals

John Asker (NYU) and Heski Bar-Isaac (Toronto) have a brilliant paper on Raising Retailers’ Profits: On Vertical Practices and the Exclusion of Rivals.

ABSTRACT: Resale price maintenance (RPM), slotting fees, loyalty rebates and other related vertical practices can allow an incumbent manufacturer to transfer pro…ts to retailers. If these retailers were to accommodate entry, upstream competition could lead to lower industry pro…ts and the breakdown of these pro…t transfers. Thus, in equilibrium, retailers can internalize the e¤ect of accommodating entry on the incumbent’s pro…ts. Consequently, if entry requires downstream accommodation, entry can be deterred. We discuss policy implications of this aspect of vertical contracting practices.

http://lawprofessors.typepad.com/antitrustprof_blog/2014/03/raising-retailers-profits-on-vertical-practices-and-the-exclusion-of-rivals.html

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