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Rebates as incentives to exclusivity

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  • Can Erutku
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    Abstract

    We show how rebates (or fidelity discounts) that take the form of lump-sum payments made to retailers can be used by an incumbent manufacturer to achieve exclusivity and to deter the entry of a more efficient rival. The results, which hold whatever the degree of differentiation between retailers and whatever the cost advantage of the entrant, are found, despite minimizing asymmetries that may favour the incumbent. As such, there is no need to introduce buyers' disorganization, discriminatory offers, economies of scale, non-coincident markets, or liquidated damages to find that exclusivity can lead to anti-competitive effects.

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    Bibliographic Info

    Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

    Volume (Year): 39 (2006)
    Issue (Month): 2 (May)
    Pages: 477-492

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    Handle: RePEc:cje:issued:v:39:y:2006:i:2:p:477-492

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    Cited by:
    1. Mikko Packalen, 2011. "Market Share Exclusion," Working Papers 1103, University of Waterloo, Department of Economics, revised Aug 2011.

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