Lecture 4 Vertical Merger and Vertical Restraints.pdf

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Lecture 4: Vertical Merger and Vertical Restraints
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Outline What are vertical restraints? Why would company want to use vertical restraints? Double marginalization Free riding Why vertical restraints and vertical merger may have procompetitive effect by solving the externality problem in intra-brand competition?
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Vertical Integration and Vertical Restraints Most industries are characterized by upstream and downstream firms. Upstream firm produces product. Downstream firm is the retailer/distributor who sells the product. For example Car manufacturer is the upstream firm Car dealer is the downstream firm
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