Exclusive contracts and market dominance

Giacomo Calzolari () and Vincenzo Denicolo' ()

No 9545, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We develop a theory of exclusive dealing that rehabilitates pre-Chicago-school analyses. Our theory rests on two realistic assumptions: that firms are imperfectly informed about demand, and that a dominant firm has a competitive advantage over its rivals. Under those assumptions, exclusive contracts tend to be pro-competitive when the dominant firm's competitive advantage is small, but are anti-competitive when it is more pronounced. In this latter case, the dominant firm uses exclusivity clauses as a means to increase its market share and profit, without necessarily driving its rivals out of the market, or impeding their entry. We discuss the implications of these results for competition policy.

Keywords: Exclusive dealing; Dominant firm; Non-linear pricing (search for similar items in EconPapers)
JEL-codes: D42 D82 L42 (search for similar items in EconPapers)
Date: 2013-07
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Citations: View citations in EconPapers (2)

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Journal Article: Exclusive Contracts and Market Dominance (2015)
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