Market‐share contracts as facilitating practices

Roman Inderst and Greg Shaffer

RAND Journal of Economics, 2010, vol. 41, issue 4, 709-729

Abstract: This article investigates how the use of contracts that condition discounts on the share a supplier receives of a retailer's total purchases (market‐share contracts) may affect market outcomes. The case of a dominant supplier that distributes its product through retailers that also sell substitute products is considered. It is found that when the supplier's contracts can only depend on how much a retailer purchases of its product (own‐supplier contracts), intra‐ and interbrand competition cannot simultaneously be dampened. However, competition on all goods can simultaneously be dampened when market‐share contracts are feasible. Compared to own‐supplier contracts, the use of market‐share contracts increases the dominant supplier's profit and, if demand is linear, lowers consumer surplus and welfare.

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

Downloads: (external link)
https://doi.org/10.1111/j.1756-2171.2010.00118.x

Related works:
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: https://EconPapers.repec.org/RePEc:bla:randje:v:41:y:2010:i:4:p:709-729

Ordering information: This journal article can be ordered from
http://www.blackwell ... al.asp?ref=0741-6261

Access Statistics for this article

RAND Journal of Economics is currently edited by James Hosek

More articles in RAND Journal of Economics from RAND Corporation Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().