Exploiting Rivals' Strengths

35 Pages Posted: 23 Dec 2020

See all articles by Giacomo Calzolari

Giacomo Calzolari

European University Institute - Economics Department (ECO); Centre for Economic Policy Research (CEPR); University of Bologna

Vincenzo Denicolò

University of Leicester

Date Written: December 2020

Abstract

Contracts that reference rivals' volumes (RRV contracts), such as exclusive dealing or market-share rebates, have been a long-standing concern in antitrust because of their possible exclusionary effects. We show, however, that it is more profitable to use these contracts to exploit rivals rather than to foreclose them. By optimally designing RRV contracts, a dominant firm may, indeed, obtain higher profits than if it were an unchallenged monopolist. In the most favorable cases, it can earn as much as if it could eliminate the competition and acquire the rivals' specific technological capabilities free of charge.

JEL Classification: D42, D82, L42

Suggested Citation

Calzolari, Giacomo and Denicolò, Vincenzo, Exploiting Rivals' Strengths (December 2020). Available at SSRN: https://ssrn.com/abstract=3753920

Giacomo Calzolari (Contact Author)

European University Institute - Economics Department (ECO) ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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University of Bologna ( email )

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HOME PAGE: http://sites.google.com/view/giacomo-calzolari

Vincenzo Denicolò

University of Leicester

University Road
Leicester, LE1 7RH
United Kingdom

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