Exclusive Contracts, Loss to Delay and Incentives to Invest
AbstractWe take the view that alternative trading opportunities may influence the loss to delay in a bargaining situation, and show that contractual exclusivity may then be relevant even for ‘internal’ investments, contradicting a recent finding by Segal and Whinston (2000). When a buyer is an ongoing concern, exclusivity in supply increases his cost of haggling/bargaining with the supplier by preventing him to buy substitute inputs, produce and cover running costs during renegotiations. This may imply a larger bargaining share for the seller and increase his investment incentives. We model this effect using Rubinstein’s (1982) bargaining model with constant but endogenous time cost
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Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society 2004 North American Winter Meetings with number 509.
Date of creation: 11 Aug 2004
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Exclusivity; Investment; Incomplete Contracts; Cost of Bargaining; Cost of Haggling;
Other versions of this item:
- Groh, Christian & Spagnolo, Giancarlo, 2004. "Exclusive Contracts, Loss to Delay and Incentives to Invest," CEPR Discussion Papers 4525, C.E.P.R. Discussion Papers.
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- L00 - Industrial Organization - - General - - - General
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
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- Chiara Fumagalli & Massimo Motta & Thomas Rønde, 2009.
"Exclusive Dealing: The Interaction between Foreclosure and Investment Promotion,"
2009.120, Fondazione Eni Enrico Mattei.
- Fumagalli, Chiara & Motta, Massimo & Rønde, Thomas, 2009. "Exclusive dealing: the interaction between foreclosure and investment promotion," CEPR Discussion Papers 7240, C.E.P.R. Discussion Papers.
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