Competition with Exclusive Contracts in Vertically Related Markets: An Equilibrium Non-Existence Result

Nicolas Schutz

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: I study a model in which two upstream firms compete to supply a homogeneous input to two downstream firms selling differentiated products. Upstream firms offer exclusive, discriminatory, public, two-part tariff contracts to the downstream firms. I show that, under very general conditions, this game does not have a pure-strategy subgame-perfect equilibrium. The intuition is that variable parts in such an equilibrium would have to be pairwise-stable; however, with pairwise-stable variable parts, downstream competitive externalities are not internalized, implying that upstream firms can profitably deviate. I contrast this non-existence result with earlier papers that found equilibria in related models.

Keywords: vertical relations; exclusive dealing; two-part tariffs; slotting fees. (search for similar items in EconPapers)
JEL-codes: L13 L14 L42 (search for similar items in EconPapers)
Pages: 31
Date: 2024-09
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind, nep-mic and nep-reg
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Related works:
Journal Article: Competition with exclusive contracts in vertically related markets: An equilibrium non-existence result (2024)
Working Paper: Competition with Exclusive Contracts in Vertically Related Markets: An Equilibrium Non-Existence Result (2013)
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