Exclusive dealing with costly rent extraction

Giacomo Calzolari (), Vincenzo Denicolo' () and Piercarlo Zanchettin

No 11291, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We analyze the impact of exclusive contracts on the intensity of competition among firms that supply substitute products. Exclusive contracts would be neutral if firms priced at marginal cost and extracted buyers' rent by means of non distortionary fixed fees. We focus instead on the case in which rent extraction is costly, and hence firms distort marginal prices upwards. We show that in this case exclusive contracts are anti-competitive when the dominant firm enjoys a large enough competitive advantage over its rivals, and are pro-competitive, or neutral, when the competitive advantage is small. These effects appear as soon as marginal prices are distorted upwards, irrespective of which specific factors impede perfect rent extraction.

Keywords: Exclusive dealing; Buyer's rent; Rent extraction; Antitrust; Dominant firm (search for similar items in EconPapers)
JEL-codes: D42 D82 L42 (search for similar items in EconPapers)
Date: 2016-05
New Economics Papers: this item is included in nep-com, nep-cta, nep-law and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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