DP3622 Liberalizing a Distribution System: the European Car Market

Author(s): Randy Brenkers, Frank Verboven
Publication Date: October 2002
Keyword(s): car market, competition policy, selective and exclusive distribution, vertical restraints
JEL(s): F00, L00
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3622

We quantify the competitive effects of removing vertical restraints, based on the recent proposals to liberalize the selective and exclusive distribution system in the European car market. We estimate a differentiated products demand system for new cars and specify a model of oligopoly pricing under the current distribution regime. We then perform several policy experiments: the creation of international intrabrand competition (cross-border trade) and a possible strengthening of national intrabrand competition. Our approach may also be useful to assess the competitive effects of vertical restraints in other applications.