Exclusive Dealing and Vertical Integration in Interlocking Relationships

Download or read book Exclusive Dealing and Vertical Integration in Interlocking Relationships written by Volker Nocke and published by . This book was released on 2014 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.