This paper studies the vertical relations between a manufacturer and one or more retailers over two periods in the presence of a competitive recycling sector. In a bilateral monopoly, two-part tariffs are always efficient, i.e. the manufacturer will produce the joint-profit-maximizing output. Under downstream oligopoly, instead, retailers compete to acquire the recycled good which allows the recycling sector to appropriate some of the industry profits. Under two-part tariffs, the manufacturer has an incentive to distort her output choices to reduce this rent loss: She will discriminate among her retailers, and she will either overproduce in the second period or underproduce in the first period. Vertical restraints that restore profit maximization (e.g. loyalty rebates) will harm consumers whenever the manufacturer would overproduce otherwise.

Vertical Relations in the Presence of Competitive Recycling / GIARDINO-KARLINGER, Liliane. - In: JOURNAL OF INDUSTRY, COMPETITION AND TRADE. - ISSN 1573-7012. - 16:1(2016), pp. 25-49. [10.1007/s10842-015-0200-1]

Vertical Relations in the Presence of Competitive Recycling

GIARDINO-KARLINGER, LILIANE
2016

Abstract

This paper studies the vertical relations between a manufacturer and one or more retailers over two periods in the presence of a competitive recycling sector. In a bilateral monopoly, two-part tariffs are always efficient, i.e. the manufacturer will produce the joint-profit-maximizing output. Under downstream oligopoly, instead, retailers compete to acquire the recycled good which allows the recycling sector to appropriate some of the industry profits. Under two-part tariffs, the manufacturer has an incentive to distort her output choices to reduce this rent loss: She will discriminate among her retailers, and she will either overproduce in the second period or underproduce in the first period. Vertical restraints that restore profit maximization (e.g. loyalty rebates) will harm consumers whenever the manufacturer would overproduce otherwise.
vertical relations, market power, two-part tariffs, fidelity rebates
Vertical Relations in the Presence of Competitive Recycling / GIARDINO-KARLINGER, Liliane. - In: JOURNAL OF INDUSTRY, COMPETITION AND TRADE. - ISSN 1573-7012. - 16:1(2016), pp. 25-49. [10.1007/s10842-015-0200-1]
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11385/162454
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