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The demand‐boost theory of exclusive dealing

Author

Listed:
  • Giacomo Calzolari
  • Vincenzo Denicolò
  • Piercarlo Zanchettin

Abstract

This article unifies various approaches to the analysis of exclusive dealing that so far have been regarded as distinct. The common element of these approaches is that firms depart from efficient pricing, raising marginal prices above marginal costs. We show that with distorted prices, exclusive dealing can be directly profitable and anticompetitive provided that the dominant firm enjoys a competitive advantage over rivals. The dominant firm gains directly, rather than in the future, or in adjacent markets, thanks to the boost in demand it enjoys when buyers sign exclusive contracts. We discuss the implication of the theory for antitrust policy.

Suggested Citation

  • Giacomo Calzolari & Vincenzo Denicolò & Piercarlo Zanchettin, 2020. "The demand‐boost theory of exclusive dealing," RAND Journal of Economics, RAND Corporation, vol. 51(3), pages 713-738, September.
    • Handle: RePEc:bla:randje:v:51:y:2020:i:3:p:713-738
    DOI: 10.1111/1756-2171.12338
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    References listed on IDEAS

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    Cited by:

    1. Hiroshi Kitamura & Noriaki Matsushima & Misato Sato, 2023. "Defending Home against Giants: Exclusive Dealing as a Survival Strategy for Local Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 71(2), pages 441-463, June.
    2. Emanuele Bacchiega & Mariachiara Colucci & Vincenzo Denicolò & Marco Magnani, 2024. "Only the Ugly Face? A Theoretical Model of Brand Dilution," Management Science, INFORMS, vol. 70(5), pages 3182-3199, May.
    3. Haijun Chen & Qi Xu, 2025. "Exclusivity Under Different Vertical Structures in Online Platforms With Network Effects," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(3), pages 1792-1815, April.
    4. Chiara Fumagalli & Massimo Motta, 2024. "Economic Principles for the Enforcement of Abuse of Dominance Provisions," Working Papers 1431, Barcelona School of Economics.
    5. Schutz, Nicolas, 2024. "Competition with exclusive contracts in vertically related markets: An equilibrium non-existence result," International Journal of Industrial Organization, Elsevier, vol. 96(C).
    6. Calzolari, Giacomo & Denicolo, Vincenzo, 2020. "Exploiting rivals' strengths," CEPR Discussion Papers 15520, Centre for Economic Policy Research.
    7. Jiyun Cao & Arijit Mukherjee, 2024. "Foreign Direct Investment and Technology Licensing in a Polluting Industry," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 87(9), pages 2361-2399, September.
    8. Bisceglia, Michele & Padilla, Jorge & Piccolo, Salvatore & Shekhar, Shiva, 2022. "Vertical integration, innovation and foreclosure with competing ecosystems," Information Economics and Policy, Elsevier, vol. 60(C).
    9. Lømo, Teis Lunde & Meland, Frode & Sandvik, Håvard Mork, 2020. "Do slotting allowances reduce product variety?," Working Papers in Economics 7/20, University of Bergen, Department of Economics.
    10. Chambolle, Claire & Christin, Clémence & Molina, Hugo, 2023. "Buyer power and exclusion: A progress report," International Journal of Industrial Organization, Elsevier, vol. 90(C).
    11. Teis Lunde Lømo, 2025. "Secret Two-Part Tariffs and Retailer Risk Aversion," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 67(1), pages 69-82, June.
    12. O’Brien, Daniel P. & Israel, Mark & Benton, Erica, 2023. "Cheap Exclusion in Markets with Multiple Complements," International Journal of Industrial Organization, Elsevier, vol. 89(C).

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