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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 strenghtening of national intrabrand competition. Our approach may also be useful to assess the competitive effects of vertical restraints in other applications.
Brenkers et al. (2006) studied this question.