Definitions

Question 1

Vertical relationships

Answer 1

Relationships between firms at different stages of the production process

Question 2

Forms of competition

Answer 2

Intrabrand and Interbrand

Question 3

Intrabrand

Answer 3

Competition between retailers for the same brand

Question 4

Interbrand

Answer 4

Competition between different brands

Question 5

Vertical restraints

Answer 5

They are clauses in contracts between firms involved in a vertical relationship. They aim to restrict behaviour and can be pro or anti competitive.

Question 6

Non linear contracts

Answer 6

Manufacturer charges a retailer a fixed fee as well as a per unit price.

Question 7

Resale Price Management

Answer 7

The manufacturer sets the price of the retailer.

Question 8

Recommended retail price

Answer 8

The manufacturer suggests what the retail price should be but the retailer doesn’t have to set it

Question 9

Exclusive territory

Answer 9

The manufacturer grants the retailer the right to be the only retailer to sell its brand in a certain region or to a certain buyer

Question 10

Exclusive dealing

Answer 10

The retailer can only sell the manufacturers brand

Question 11

Selective distribution

Answer 11

The manufacturer only lets certain retailers to sell its brand

Question 12

Integration

Answer 12

It is a vertical merger that improved efficiency by internalising externalities

Question 13

Vertical restraints aren’t illegal but when do concerns arise

Answer 13

When the firms involved have more than 30% market share

Question 14

Double Marginalisation

Answer 14

Firms at different stages of production put positive markups on the good, leading to inefficiently high prices