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Topic 14: Vertical Restraints

A ntitrust Economics 2013. David S. Evans University of Chicago, Global Economics Group. Elisa Mariscal CIDE, Global Economics Group. Topic 14: Vertical Restraints. Topic 14| Part 2 21 November 2013. Date. Overview. Vertical Restraints and Efficiency. Resolving Conflicts Among Firms .

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Topic 14: Vertical Restraints

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  1. Antitrust Economics 2013 David S. Evans University of Chicago, Global Economics Group Elisa Mariscal CIDE, Global Economics Group Topic 14: Vertical Restraints Topic 14| Part 2 21 November 2013 Date

  2. Overview

  3. Vertical Restraints and Efficiency

  4. Resolving Conflicts Among Firms

  5. Overview of Vertical Restraints Vertical Restraints Help Resolve Conflicts

  6. Overview of Vertical Restraints Purpose of Vertical Restraints

  7. Major Contract Instruments for Maximizing and Splitting the Pie

  8. Overview of Vertical Restraints Direct Pricing Methods

  9. Overview of Vertical Restraints Indirect Pricing Mechanisms

  10. Pro-Efficiency Reasons for Vertical Restraints Efficiency Reasons for Vertical Restraints • Note: In all these cases firms in a vertical chain could obtain the efficiency through vertical integration; vertical restraints solve market coordination problem through contractual mechanisms that fall short of full integration. Why do firms choose vertical restraints rather than full integration?

  11. Pro-Efficiency Reasons for Vertical Restraints Vertical Restraint and Double Marginalisation

  12. Pro-Efficiency Reasons for Vertical Restraints Two Part Tariff

  13. Pro-Efficiency Reasons for Vertical Restraints Resale price maintenance

  14. Encouraging Optimal Sales Effort c pw p, effort Consumers Q(p,e)

  15. Encouraging Optimal Sales Effort c pw Consumers Q(p,e)

  16. Pro-Efficiency Reasons for Vertical Restraints Retail Free Riding

  17. Pro-Efficiency Reasons for Vertical Restraints Externalities

  18. Pro-Efficiency Reasons for Vertical Restraints Risk Sharing c Manufacturer T=F + cq Retailer p =RPM Consumers Q(p)

  19. Using Vertical Restraints to Foreclosure Competition

  20. Using vertical restraints to foreclosure competition Essential Facilities and Monopoly Leveraging

  21. The Single Monopoly Profit Theorem Using vertical restraints to foreclosure competition M R1 R2 Consumers Chicago Critique of Monopoly Foreclosure

  22. Using vertical restraints to foreclosure competition Summary of Post-Chicago Models

  23. Overview of Empirical Findings

  24. Multi-Sided Platforms

  25. Platforms Need Critical Mass to Ignite

  26. Critical Mass, Platform Ignition and Growth Side A

  27. Making It Harder for Rivals to Reach Critical Mass These are possibilities. Unclear how significant they are in practice given that rivals have counterstrategies.

  28. Vertical Restraints that Might Deter Entry

  29. Some Procompetitive Explanations of Vertical Restraints

  30. Balancing and Some Complexities

  31. Vertical Restraints and Platform Governance

  32. Factors to Consider in Evaluating Vertical Restraints for Platforms

  33. End of Part 1, Next Class Part 2

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