Exclusive Quality

Cédric Argenton

No 640, Working Paper Series in Economics and Finance from Stockholm School of Economics

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.

Keywords: vertical differentiation; contracts; exclusion; monopolization (search for similar items in EconPapers)
JEL-codes: L12 L42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com
Date: 2006-10-18, Revised 2007-06-05
View list of references

Downloads: (external link)
http://swopec.hhs.se/hastef/papers/hastef0640.pdf (application/pdf)

Related works:
Working Paper: Exclusive Quality (2008)
Working Paper: Exclusive Quality (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:hhs:hastef:0640

Access Statistics for this paper

More papers in Working Paper Series in Economics and Finance from Stockholm School of Economics
Address: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Contact information at EDIRC.
Series data maintained by Helena Lundin ().