This analysis tests the free-rider hypothesis as it applies to the Sealy mattress licensing system, one of the oldest and most prominent examples of vertical and horizontal distribution restraints. The results reported here focus on the period following the elimination of Sealy's territorial restraints in 1980. Using alternative samples, units of measurement, and estimating techniques, the analyses yield consistent results supporting the market power hypothesis: the Sealy territorial restraints on distribution decreased output and increased prices. Copyright 1991 by MIT Press.

A potentially important parameter that has not yet been convincingly estimated is the critical concentration ratio. This paper attempts to estimate it in three types of market. The estimation of a critical concentration ratio, if one exists, seems of potentially great importance because of its implication for antitrust policy. If a critical concentration ratio were found and if concentration had no effect below that level, it would seem to follow that a horizontal merger in a market where concentration was below the critical level and where the merger could not increase concentration to the critical level could not substantially lessen competition or tend to create monopoly.