Vertical Agreements: Motivation and Impact

Abstract

After an introduction to Chicago School antitrust analysis, this paper provides an overview of the main insights that economic theory has provided in regard to vertical agreements. Following a theoretical discussion of both the benign and anticompetitive motivations for vertical coordination and a survey of the empirical literature, the paper concludes that while a general per se prohibition on price restraints is unlikely to be appropriate, there is reason to have a policy that is more restrictive on price restraints than nonprice restraints.

Keywords: vertical restraints, competition policy

JEL Classification: L42, K21