Two Tales on Resale

Höffler, Felix and Schmidt, Klaus M. (March 2007): Two Tales on Resale. SFB/TR 15 Discussion Paper No. 198

Abstract

In some markets vertically integrated firms sell directly to final customers hut also to independent downstream firms with whom they then compete on the downstream market. It is often argued that resellers intensify competition and benefit consumers, in particular when wholesale prices are regulated. However, we show that (i) resale may increase prices and make consumers worse off and that (ii) standard "retail minus X regulation" may increase prices and harm consumers. Our analysis suggests that this is more likely if the number of integrated firms is small, the degree of product differentiation is low, and/or if competition is spatial.

• Item Type: Paper
• Keywords: Resale regulation, wholesale, spatial product differentiation, non-spatial product differentiation, vertical restraints
• Faculties: Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > A4 - Unvollständige Verträge, Marktinteraktion und soziale Vergleichsprozesse; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > B3 - Unternehmenskontrolle, Unternehmensfinanzierung und Effizienz; Economics; Economics > Chairs > Seminar for Economic Theory
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: D43, L11, L42, L51
• Language: English