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Exclusive contracts with vertically differentiated products

Author

Listed:
  • Barna Bakó

    () (Corvinus University of Budapest, Department of Microeconomics)

Abstract

In 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.

Suggested Citation

  • Barna Bakó, 2012. "Exclusive contracts with vertically differentiated products," Economics Bulletin, AccessEcon, vol. 32(2), pages 1312-1319.
  • Handle: RePEc:ebl:ecbull:eb-11-00848
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I2-P125.pdf
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    References listed on IDEAS

    as
    1. Stefanadis, Christodoulos, 1998. "Selective Contracts, Foreclosure, and the Chicago School View," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 429-450, October.
    2. Rasmusen, Eric B & Ramseyer, J Mark & Wiley, John S, Jr, 1991. "Naked Exclusion," American Economic Review, American Economic Association, vol. 81(5), pages 1137-1145, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    vertical differentiation; exclusive contracts; double marginalization;

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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