Exclusive Quality

Cédric Argenton

No 2008-20, Discussion Paper from Tilburg University, Center for Economic Research

Abstract: 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 offer high enough an upfront payment to induce all retailers to sign on the contract and achieve exclusion.

JEL-codes: L12 L42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-mic
Date: 2008
View list of references

Downloads: (external link)
http://arno.uvt.nl/show.cgi?fid=71022 (application/pdf)

Related works:
Working Paper: Exclusive Quality (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Access Statistics for this paper

More papers in Discussion Paper from Tilburg University, Center for Economic Research
Series data maintained by Corry Stuyts ().