The Demand-boost Theory of Exclusive Dealing

50 Pages Posted: 12 Jan 2024

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

Piercarlo Zanchettin

University of Leicester

Date Written: November 15, 2019

Abstract

This article unifies various approaches to the analysis of exclusive dealing that so far have been regarded as distinct. The common element of these approaches is that firms depart from efficient pricing, raising marginal prices above marginal costs. We show that with distorted prices, exclusive dealing can be directly profitable and anticompetitive provided that the dominant firm enjoys a competitive advantage over rivals. The dominant firm gains directly, rather than in the future, or in adjacent markets, thanks to the boost in demand it enjoys when buyers sign exclusive contracts. We discuss the implication of the theory for antitrust policy.

Suggested Citation

Calzolari, Giacomo and Denicolò, Vincenzo and Zanchettin, Piercarlo, The Demand-boost Theory of Exclusive Dealing (November 15, 2019). RAND Journal of Economics, Vol. 53, 2020, Available at SSRN: https://ssrn.com/abstract=4672270 or http://dx.doi.org/10.2139/ssrn.4672270

Giacomo Calzolari

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 (Contact Author)

University of Leicester

University Road
Leicester, LE1 7RH
United Kingdom

Piercarlo Zanchettin

University of Leicester ( email )

Department of Economics
Leicester, LE1 7RH
United Kingdom

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