Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/56303
Authors: 
Argenton, Cédric
Year of Publication: 
2006
Series/Report no.: 
SSE/EFI Working Paper Series in Economics and Finance 640
Abstract: 
It is shown in this study that in the case of vertically differentiated products, Bertrand competition at the retail level does not prevent an incumbent upstream firm from using exclusivity contracts to deter the entry of a more efficient rival, contrary to what happens in the homogenous product case. Indeed, because of differentiation, the incumbent's inferior product is not eliminated upon entry. As a result, a retailer who considers rejecting the exclusivity clause expects to earn much less than the incumbent's monopoly rents. Thus, in equilibrium, the incumbent can always offer high enough an upfront payment to induce all retailers to sign on the contract.
Subjects: 
vertical differentiation
contracts
exclusion
monopolization
JEL: 
L12
L42
Document Type: 
Working Paper

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