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Title :Vertical Relations in Oligopolistic Markets
Alternative Title :Κάθετες σχέσεις σε ολιγοπωλιακές αγορές
Creator :Μουστάκας, Αλέξανδρος
Contributor :Βέττας, Νικόλαος (Επιβλέπων καθηγητής)
Athens University of Economics and Business, Department of Economics (Degree granting institution)
Type :Text
Extent :41p.
Language :en
Abstract :This literature review examines some important insights on the effects of vertical relations, with an emphasis on oligopolistic markets. After a brief description of the most common vertical relations, in the first part of the thesis we discuss the effects of vertical restraints in non-strategic environments, presenting how such restraints can facilitate the coordination within a vertical structure, how enhanced coordination can improve the efficiency of the vertical structure, and how this can in some cases benefit consumers, as well as the firms involved. We also discuss how vertical restraints can solve commitment problems within a vertical structure, enabling it to exercise market power, thus harming social welfare.In the second part of the thesis we focus on the strategic effects of vertical restraints, when these are employed in oligopolistic markets. We discuss how vertical restraints can be used by competing manufacturers to credibly commit on non-aggressive behavior against each other, thereby helping them to maintain high retail prices and enjoy collusive profits, as well as how such restraints can help cartelization by improving the observability of deviation from a cartel agreement. We also discuss how vertical restraints can be used by firms to achieve collusive outcomes in common agency situations. Finally, we present an extensive discussion on the various ways in which vertical restraints can be used by firms to create entry barriers and prevent potential rivals from accessing a market.One of the main conclusions drawn from the review of the literature on vertical restraints is that in markets where competition is strong such restraints are unlikely to have a negative welfare impact. In this sense regulation should be focused primarily on cases where the firms involved have significant market power. Another important observation is that in a given market setting many different types of vertical restraints can be alternatively used to obtain the same results. Conversely, we note that the same type of restraint can have different effects when used under different market conditions. These observations imply that there is no thumb-rule to assess the welfare impact of vertical restraints. Therefore competition authorities should probably examine the effects of vertical restraints on a case-by-case basis, using a rule of reason, rather than prohibiting the use of certain types of restraints per se.
Subject :Oligopolistic markets
Vertical restraints
Intra-Brand Competition
Date :30-04-2010
Licence :

File: Moustakas_2010.pdf

Type: application/pdf