Exclusive Dealing with Imperfect Downstream Competition

23 Pages Posted: 10 Jan 2006

See all articles by Jose Miguel Abito

Jose Miguel Abito

University of Toulouse 1

Julian Wright

National University of Singapore (NUS) - Department of Economics

Date Written: December 2005

Abstract

The existing literature on exclusive dealing is extended to take into account that buyers signing exclusive deals are typically competing firms that are differentiated from the perspective of their customers. We show, provided such downstream firms are not too differentiated, exclusive contracts will foreclose a more efficient upstream firm. In this case, an established upstream firm and competing downstream firms raise their joint surplus by signing exclusive deals to protect the industry from upstream competition. Thus, inefficient Naked Exclusion arises even when the Chicago School logic that buyers will only sign contracts that make themselves (jointly) better off holds.

Keywords: exclusive contracts, Naked Exclusion, differentiated products

JEL Classification: L12, L13, L42

Suggested Citation

Abito, Jose Miguel and Wright, Julian, Exclusive Dealing with Imperfect Downstream Competition (December 2005). Available at SSRN: https://ssrn.com/abstract=874254 or http://dx.doi.org/10.2139/ssrn.874254

Jose Miguel Abito

University of Toulouse 1 ( email )

Place Anatole France
Toulouse Cedex, F-31042
France

Julian Wright (Contact Author)

National University of Singapore (NUS) - Department of Economics ( email )

AS2 Level 6, 1 Arts Link
Singapore 117570
Singapore
6568743941 (Phone)
6567752646 (Fax)

HOME PAGE: http://profile.nus.edu.sg/fass/ecsjkdw/

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