Further, it is likely that vertical contracts
between insurers and body shops reduce the instance of insurance fraud.
The overall welfare effects of vertical integration or these substitute nonstandard vertical contracts
when there is market power upstream and input-substitution possibilities downstream are positive, although the effect on consumer prices is ambiguous when the downstream market is competitive.
For example, more liquid aircraft are more redeployable and should then have longer financing contracts (as in Shleifer and Vishny, 1992), but are also less specific and should then have shorter vertical contracts
(as in Williamson, 1979).
"Under vertical contracts
, the processor owns the product in production, while the contractee generally furnishes the labor and facilities for production.
Fumagalli and Motta (2001) consider an industry characterized by secret vertical contracts
, and examine a benchmark case where there are two vertical chains, in which two upstream manufacturers sell to two downstream retailers, thereby demonstrating that a downstream merger is more welfare detrimental than an upstream merger.
The vertical contracts
are assumed to establish only the relationship-specificity, but not the transfers from a retailer to its upstream supplier.
This Regulation lays down that all vertical contracts
and agreements, in order to be granted exemption, must be notified to the Commission's Competition Directorate-General prior to the date of exemption.
A recent study for the US Department of Agriculture on concentration in the red meat industry concluded that with the extent of vertical contracts
, and so few processors, it is impossible for farmers to determine a market price.
Many vertical contracts
call for conduct by distributors that affects competition either upstream or downstream.
Typically, leaks in the boundary between the categories have flowed one way, in looking at how concerns in the horizontal category might warrant legal limitations on the freedom to write vertical contracts
. My purpose here is to redirect the hydraulics, to see if our understanding of horizontal agreements might be informed by some of the efficiency-based explanations for vertical restraints.