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Regular version of the site

Book chapter

Chain store against manufacturers: Regulation can mitigate market distortion

P. 480-493.
Bykadorov I., Ellero A., Funari S., Kokovin S. G., Pudova M.

Contemporary domination of chain-stores in retailing is modeled, perceiving a monopolistic retailer as a market leader. A myriad of her suppliers compete in a monopolistic competitive sector, displaying quadratic consumers’ preferences for a differentiated good. The leader announces her markup before the suppliers choose their prices/quantities. She may restrict the range of suppliers or allow for free entry. Then, a market distortion, stemming from double marginalization and excessive variety would be softened whenever the government allows the retailer to apply an entrance fee to the suppliers, or/and per-quantity sales subsidies (doing the opposite to usual Russian regulation).