Exclusive Contracts, Loss to Delay and Incentives to Invest

Giancarlo Spagnolo and Christian Groh

No 4525, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We model a new effect of exclusivity on non-contractible investments in buyer/seller relationships. By restricting the buyer to purchase from only one seller, exclusivity increases the buyer?s costs of haggling during renegotiation and hence the seller?s relative bargaining power and bargaining share. This in turn fosters the seller?s incentives to invest even for investments that are fully specific to the relationship (?internal investments?), in contrast to a recent finding by Segal and Whinston (2000b).

Keywords: Bargaining; Contracting; Exclusive dealing; Incomplete contracts; investment; Foreclosure (search for similar items in EconPapers)
JEL-codes: C78 D23 L20 L42 (search for similar items in EconPapers)
Date: 2004-08
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (3)

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Working Paper: Exclusive Contracts, Loss to Delay and Incentives to Invest (2004)
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