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Exclusive contracts with private information in successive differentiated oligopolies

Author

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  • Barna Bakó

    (Corvinus University of Budapest)

Abstract

The purpose of this article is to analyze the incentives of manufacturers to deal exclusively with retailers in bilaterally duopolistic industries with brand differentiation by manufacturers. In contrast with the previous literature, exclusive contracts are shown to generate higher profits for manufacturers and retailers selling highly differentiated products, who thus have an incentive to insist on exclusive contracting. However, if the products are close substitutes no exclusivity will emerge in equilibrium. Furthermore, we show that exclusive contracts decrease both consumer and social welfare.

Suggested Citation

  • Barna Bakó, 2016. "Exclusive contracts with private information in successive differentiated oligopolies," European Journal of Law and Economics, Springer, vol. 42(3), pages 539-546, December.
    • Handle: RePEc:kap:ejlwec:v:42:y:2016:i:3:d:10.1007_s10657-013-9410-3
    DOI: 10.1007/s10657-013-9410-3
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    References listed on IDEAS

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    1. Oliver Hart & Jean Tirole, 1990. "Vertical Integration and Market Foreclosure," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1990 Micr), pages 205-286.
    2. Mauleon, Ana & Sempere-Monerris, Jose J. & Vannetelbosch, Vincent J., 2011. "Networks of manufacturers and retailers," Journal of Economic Behavior & Organization, Elsevier, vol. 77(3), pages 351-367, March.
    3. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(2), pages 185-199.
    4. Daniel P. O'Brien & Greg Shaffer, 1992. "Vertical Control with Bilateral Contracts," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 299-308, Autumn.
    5. McAfee, R Preston & Schwartz, Marius, 1994. "Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity," American Economic Review, American Economic Association, vol. 84(1), pages 210-230, March.
    6. Rafael Moner-Colonques & José J. Sempere-Monerris & Amparo Urbano, 2004. "The Manufacturers’ Choice of Distribution Policy under Successive Duopoly," Southern Economic Journal, John Wiley & Sons, vol. 70(3), pages 532-548, January.
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    Cited by:

    1. Li, Shengyu & Luo, Rong, 2020. "Non-Exclusive Dealing with Retailer Differentiation and Market Penetration," International Journal of Industrial Organization, Elsevier, vol. 70(C).

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    More about this item

    Keywords

    Exclusive contracts; Product differentiation; Vertical integration;
    All these keywords.

    JEL classification:

    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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