Competition with exclusive contracts in vertically related markets: An equilibrium non-existence result

Nicolas Schutz

International Journal of Industrial Organization, 2024, vol. 96, issue C

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)
Date: 2024
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Related works:
Working Paper: 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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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:96:y:2024:i:c:s0167718724000523

DOI: 10.1016/j.ijindorg.2024.103097

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