Thursday, November 19, 2015

Exclusive Contracts and Market Dominance

Giacomo Calzolari and Vincenzo Denicolo have an interesting paper on Exclusive Contracts and Market Dominance.

ABSTRACT: We propose a new theory of exclusive dealing. The theory is based on the assumption that a dominant firm has a competitive advantage over its rivals, and that the buyers' willingness to pay for the product is private information. In this setting, the dominant firm can impose contractual restrictions on buyers without necessarily compensating them, implying that exclusive dealing contracts can be both profitable and anticompetitive. We discuss the general implications of the theory for competition policy and illustrate by examples its applicability to antitrust cases.

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