Exclusive Contracts When the Incumbent can Establish a Direct Retailer

20 Pages Posted: 23 Oct 2011 Last revised: 25 Apr 2014

See all articles by Hiroshi Kitamura

Hiroshi Kitamura

Kyoto Sangyo University

Misato Sato

Okayama University - Economics

Koki Arai

JFTC & CPRC (Japan Fair Trade Commission)

Date Written: January 16, 2013

Abstract

This paper constructs a model of anticompetitive exclusive dealings with potential downstream competition. Unlike in previous studies, the incumbent can establish a direct retailer with some fixed payment and can offer an exclusive contract to a downstream buyer twice. We show that the existence of these two options helps the incumbent deter socially efficient entry and earn almost monopoly profits even in the absence of scale economies and downstream competition.

Keywords: vertical relation, exclusive dealing, direct retailers, two offers

JEL Classification: L12, L41, L42

Suggested Citation

Kitamura, Hiroshi and Sato, Misato and Arai, Koki, Exclusive Contracts When the Incumbent can Establish a Direct Retailer (January 16, 2013). Journal of Economics, Vol. 112(1), pp 47-60, May 2014, Available at SSRN: https://ssrn.com/abstract=1947794 or http://dx.doi.org/10.2139/ssrn.1947794

Hiroshi Kitamura (Contact Author)

Kyoto Sangyo University ( email )

Motoyama, Kamigamo, Kita-Ku
Kyoto, Kyoto 603-8555
Japan

HOME PAGE: http://sites.google.com/view/hiroshikitamura/home

Misato Sato

Okayama University - Economics ( email )

Japan

Koki Arai

JFTC & CPRC (Japan Fair Trade Commission) ( email )

Tokyo
Japan

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