Exclusive Contracts and Market Dominance
Giacomo Calzolari, Vincenzo Denicolò
American Economic Review · 2015 · Volume 105 · Issue 11
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. (JEL D21, D43, D82, D86, K21, L13, L40)
Keywords
Firm Behavior: Theory, Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection, Asymmetric and Private Information, Mechanism Design, Economics of Contract: Theory, Antitrust Law, Oligopoly and Other Imperfect Markets, Antitrust Issues and Policies: General
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