Exclusive dealing and common agency in international markets

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jinteco.2005.06.005 Byline: Horst Raff (a), Nicolas Schmitt (b)(c) Keywords: International trade; Exclusive dealing; Common agency; Vertical restraints; Competition policy Abstract: This paper investigates the contractual choice between exclusive dealing and common agency in a simple international oligopoly model where products are sold through intermediaries. We find that when trade barriers are high, domestic firms tend to adopt exclusive dealing contracts whereas trade liberalization may lead firms to choose common agency. Social welfare can be raised be prohibiting exclusive dealing (common agency) when trade barriers are high (low) and products are close substitutes. Author Affiliation: (a) Institut fur Volkswirtschaftslehre, Christian-Albrechts-Universitat zu Kiel, D-24098 Kiel, Germany (b) Department of Economics, 8888 University Drive, Simon Fraser University, Burnaby, Canada V5A 1S6 (c) Departement d'economie politique, Universite de Geneve, CH-1211 Geneve 4, Switzerland Article History: Received 9 February 2004; Revised 22 May 2005; Accepted 22 June 2005