Exclusive Contracts When the Incumbent can Establish a Direct Retailer
20 Pages Posted: 23 Oct 2011 Last revised: 25 Apr 2014
Date Written: January 16, 2013
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: Suggested Citation