Paying not to sell

Posted by D. Daniel Sokol

E. Bacchiega (Bologna), O. Bonroy (INRA) and R. Mabrouk (Grenoble) suggest Paying not to sell.

ABSTRACT: In this paper we show that, in the presence of buyer and seller power, a monopolist can enter into a costly contractual relationship with a low-quality supplier with the sole intention of improving its bargaining position relative to a high-quality supplier, without ever selling the good produced by that firm.