Entry deterrrence via renegotiation-proof non-exclusive contracts
AbstractWe establish the entry-deterring role of vertical contracts in a setting that does not rely on asymmetric information, the exclusivity of the incumbent’s contracts, limits on distribution channels, or restrictions on the ability to renegotiate contracts in case of entry. The optimal contract we describe is a three-part quantity discounting contract that involves the payment of an allowance to the downstream firm and a marginal wholesale price below the incumbent’s marginal cost for sufficiently large quantities
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Bibliographic InfoPaper provided by University of Ottawa, Department of Economics in its series Working Papers with number 1105E.
Length: 25 pages
Date of creation: 2011
Date of revision:
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More information through EDIRC
entry; vertical contracts; exclusivity; renegotiation;
Find related papers by JEL classification:
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-18 (All new papers)
- NEP-BEC-2011-06-18 (Business Economics)
- NEP-COM-2011-06-18 (Industrial Competition)
- NEP-CTA-2011-06-18 (Contract Theory & Applications)
- NEP-IND-2011-06-18 (Industrial Organization)
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