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Exclusive dealing in the presence of a vertically integrated firm

Author

Listed:
  • Dang-Long Bui
  • Damiana Simanjuntak
  • Joe Maganga Zonda

Abstract

This study constructs a successive Cournot model to investigate the possibility that a separated upstream input supplier can solely sell the intermediate good to a separated downstream manufacturer through an exclusive contract in the presence of a vertically integrated rival. We find that the separated firms are indifferent on whether to sign the exclusive contract or not if the downstream party is less efficient than the integrated firm in producing the final good. Next, the separated firms with an efficient downstream party are indifferent between signing or not signing, willing to sign, and not willing to sign the exclusive contract if the upstream cost differential is relatively low, medium, and high, respectively. Finally, signing such an exclusive contract does not increase con-sumer surplus and social welfare.

Suggested Citation

  • Dang-Long Bui & Damiana Simanjuntak & Joe Maganga Zonda, 2023. "Exclusive dealing in the presence of a vertically integrated firm," Estudios de Economia, University of Chile, Department of Economics, vol. 50(1 Year 20), pages 5-30, June.
    • Handle: RePEc:udc:esteco:v:50:y:2023:i:1:p:5-30
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    File URL: https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/70868/73183
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    More about this item

    Keywords

    Exclusive dealing; vertical integration; successive Cournot model.;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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