Exploiting Rivals' Strengths

Giacomo Calzolari and Vincenzo Denicolò

American Economic Journal: Microeconomics, 2026, vol. 18, issue 3, 77-104

Abstract: We analyze oligopolistic competition in which firms use contracts contingent on what buyers purchase from their rivals. We present a new mechanism through which a dominant firm, by using these contracts, can gain more from exploiting its rivals than from foreclosing them. This exploitation is achieved by requiring buyers to source at least a certain share of their total requirements from the dominant firm, though less than 100 percent. By optimally designing these contracts, the dominant firm can earn as much as it would if it were to acquire the rivals' specific technological and marketing capabilities at no cost.

JEL-codes: D43 D82 D86 K21 L14 M31 (search for similar items in EconPapers)
Date: 2026
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DOI: 10.1257/mic.20240219

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