Mandated Exclusive Territories and Economic Efficiency: An Empirical Analysis of the Malt-Beverage Industry

* We thank Bruce Benson, Robert B. Ekelund, Jr., Roger Folsom, Gary Fournier, Micha Gisser, Doug Greer, Barry Hirsch, John Morris, and an anonymous referee for their valuable comments. We are also grateful to Jerry Steinman and Frank Chaloupka for providing some of the data. Alex Hayes, John Keiffer, Mike Lund, Mark Nichols, and Mark Thornton provided able research assistance. The San Jose State University College of Social Sciences provided financial support to Saurman. Any remaining errors are solely our responsibility. Industries in which firms have imposed vertical territorial restraints include audio components, hearing aids, sailboats, soft drinks, and beer. See Thomas R. Overstreet, Resale Price Maintenance: Economic Theories and Empirical Evidence 84-101 (staff report, Federal Trade Commission, Bureau of Economics 1983). For discussions of the territorial restrictions in the hearing aid industry, see Howard P. Marvel, Vertical Restraints in the Hearing Aids Industry, in Impact Evaluations of Federal Trade Commission Vertical Restraints Cases (Ronald N. Lafferty, Robert H. Lande, and John B. Kirkwood eds. 1984). Robert Larner, The Economics of Territorial Restrictions in the Soft Drink Industry, 22 Antitrust Bull. 145 (1977); Barbara G. Katz, Territorial Exclusivity in the Soft Drink Industry, 27 J. Indus. Econ. 85 (1978); and Louis W. Stern, Eugene F. Zelek, and Thomas W. Dunfee, A Rule of Reason Analysis of Territorial Restrictions in the Soft Drink Industry, 27 Antitrust Bull. 481 (1982), analyze the use of exclusive territories in the soft-drink industry. None of these articles include empirical tests, however.

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