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The Balance of Power between Producers and Retailers: aDifferentiation Model

Published online by Cambridge University Press:  17 August 2016

Marie-Laure Allain
Marie-Laure Allain*
Affiliation:
CNRS École Polytechnique et CREST **
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Summary

This paper argues that the balance of power between producers and retailersdepends on the relative degrees of differentiation at the two levels of thevertical structure. We propose an extension of Hotelling’s model in whichtwo producers, competing in prices with horizontally differentiatedproducts, face two horizontally differentiated retailers also competing inprices. We study the setting of producers’ and retailers’ margins. We showthat when retailers are more differentiated than producers, they dominatethe relationship and their margin is higher than producers’.

Résumé

Résumé

Cet article étudie l’impact des différenciations entre producteurs et entredistributeurs sur leurs rapports de force. On construit une extension dumodèle d’Hotelling à deux dimensions dans lequel deux producteurs sont enconcurrence à la Bertrand en produits différenciés horizontalement et fontface à deux distributeurs différenciés horizontalement et eux aussi enconcurrence à la Bertrand. On étudie l’influence des deux degrés dedifférenciation sur les marges des producteurs et des distributeurs, et onmontre que lorsque les distributeurs sont plus différenciés que lesproducteurs, leurs marges sont plus importantes, et le rapport de force esten leur faveur.

Keywords

Vertical relationshipsdifferentiationL13L22Relation verticaledifférenciationL13L22

Information

Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 68 , Issue 3 , 2002 , pp. 359 - 370
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 2002 

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Footnotes

*

I thank Laurent Flochel, Anne Perrot, Bernard Salanié and two anonymous referees for their comments.

**

CNRS-Laboratoire d’Econométrie, École Polytechnique, 1 rue Descartes 75005 Paris (Tel: 33 1 55 55 85 41, E-Mail: marie-laure.allain@polytechnique.fr) et CREST-LEI.

References

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