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Exclusive Contracts and Market Dominance

55 Pages Posted: 9 Jul 2013  

Giacomo Calzolari

University of Bologna

Vincenzo Denicolò

University of Bologna

Date Written: July 2013


We develop a theory of exclusive dealing that rehabilitates pre-Chicago-school analyses. Our theory rests on two realistic assumptions: that firms are imperfectly informed about demand, and that a dominant firm has a competitive advantage over its rivals. Under those assumptions, exclusive contracts tend to be pro-competitive when the dominant firm's competitive advantage is small, but are anti-competitive when it is more pronounced. In this latter case, the dominant firm uses exclusivity clauses as a means to increase its market share and profit, without necessarily driving its rivals out of the market, or impeding their entry. We discuss the implications of these results for competition policy.

Keywords: Dominant firm, Exclusive dealing, Non-linear pricing

JEL Classification: D42, D82, L42

Suggested Citation

Calzolari, Giacomo and Denicolò, Vincenzo, Exclusive Contracts and Market Dominance (July 2013). CEPR Discussion Paper No. DP9545. Available at SSRN: https://ssrn.com/abstract=2291366

Giacomo Calzolari (Contact Author)

University of Bologna ( email )

Piazza Scaravilli 2
I-40126 Bologna
0039 051 2098489 (Phone)
0039 051 2098493 (Fax)

HOME PAGE: http://www2.dse.unibo.it/calzolari/

Vincenzo Denicolo

University of Bologna ( email )

Strada Maggiore 45
Bologna, 40125

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