Exclusive contracts with vertically differentiated products
AbstractIn this paper we develop a simple model to analyze the effects of exclusive contracts in vertically integrated markets where both the upstream and the downstream market are characterized as oligopolies and manufacturers produce vertically differentiated products. We find that firms prefer to deal exclusively with retailers. If the extent of consumers' heterogeneity is small, manufacturers offer exclusive contracts unilaterally. On the other hand, if consumers' valuations differ significantly both manufacturers engage in exclusive contracting.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 32 (2012)
Issue (Month): 2 ()
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vertical differentiation; exclusive contracts; double marginalization;
Find related papers by JEL classification:
- D4 - Microeconomics - - Market Structure and Pricing
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
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- Stefanadis, Christodoulos, 1998. "Selective Contracts, Foreclosure, and the Chicago School View," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 41(2), pages 429-50, October.
- Rasmusen, Eric B & Ramseyer, J Mark & Wiley, John S, Jr, 1991. "Naked Exclusion," American Economic Review, American Economic Association, American Economic Association, vol. 81(5), pages 1137-45, December.
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