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Exclusive dealing and vertical integration in interlocking relationships

Volker Nocke () and Patrick Rey ()

Journal of Economic Theory, 2018, vol. 177, issue C, 183-221

Abstract: We develop a model of interlocking bilateral relationships between upstream firms (manufacturers) that produce differentiated goods and downstream firms (retailers) that compete imperfectly for consumers. Contract offers and acceptance decisions are private information to the contracting parties. We show that both exclusive dealing and vertical integration between a manufacturer and a retailer lead to vertical foreclosure, to the detriment of consumers and society. Finally, we show that firms have indeed an incentive to sign such contracts or to integrate vertically.

Keywords: Vertical relations; Exclusive dealing; Vertical merger; Foreclosure; Bilateral contracting (search for similar items in EconPapers)
JEL-codes: L13 L42 D43 (search for similar items in EconPapers)
Date: 2018
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Related works:
Working Paper: Exclusive Dealing and Vertical Integration in Interlocking Relationships (2018) Downloads
Working Paper: Exclusive Dealing and Vertical Integration in Interlocking Relationships (2014) Downloads
Working Paper: Exclusive Dealing and Vertical Integration in Interlocking Relationships (2014) Downloads
Working Paper: Exclusive dealing and vertical integration in interlocking relationships (2014) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:177:y:2018:i:c:p:183-221

DOI: 10.1016/j.jet.2018.06.003

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