The B.E. Journal of Economic Analysis & Policy
Editor-in-Chief: Ludwig, Sandra / Schmitz, Hendrik
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In antitrust practice, it is often argued that independent distributors of goods have an incentive to supply lower levels of brand-specific promotional services than a vertically integrated supplier. This paper outlines the conditions under which this claim is correct. Independent distributors have lower incentives to engage in promotion (i) if economies of scale exist in the provision of promotional services and (ii) if consumers with lower willingness to pay over-proportionally respond to promotional activity. When these conditions do not hold, independent distributors may actually supply more promotional services than integrated distributors.