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Exclusive dealing and vertical integration in interlocking relationships

Author

Listed:
  • Volker Nocke

    (Universite de Californie)

  • Patrick Rey

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique)

Abstract

We develop a model of interlocking bilateral relationships between upstream manufacturers that produce differentiated goods and downstream retailers that compete imperfectly for consumers. Contract offers and acceptance decisions are private information to the contracting parties. We show that both exclusive dealing and vertical integration between a manufacturer and a retailer lead to vertical foreclosure, at the detriment of consumers and society. Finally, we show that firms have indeed an incentive to sign such contracts or to integrate vertically.

Suggested Citation

  • Volker Nocke & Patrick Rey, 2018. "Exclusive dealing and vertical integration in interlocking relationships," Post-Print hal-02621675, HAL.
    • Handle: RePEc:hal:journl:hal-02621675
    DOI: 10.1016/j.jet.2018.06.003
    Note: View the original document on HAL open archive server: https://hal.inrae.fr/hal-02621675v1
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    More about this item

    Keywords

    Vertical relations; Exclusive dealing; Vertical merger; Foreclosure; Bilateral contracting;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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