Capacity restriction by retailers
Year of publication: 2008
Issue: 2
Type: Working paper
Abstract
A monopolist retailer facing two suppliers producing two symmetric and independent goods improves its bargaining position by commiting to sell only one good. We analyze if this advantage extends to the case where there are two undierentiated retailers competing in the same market. With linear supply contracts, we have partial capacity restriction in the sense that only one retailer commits to sell only one good. Then, we have that if retailers were to merge, welfare would decrease because the merger reduces the variety of goods available to consumers.