Template-Type: ReDIF-Paper 1.0
Title: Competition with Exclusive Contracts in Vertically Related Markets: An Equilibrium Non-Existence Result
Author-Name: Nicolas Schutz
Author-Email: schutz@uni-mannheim.de

Classification-JEL: L13, L14, L42
Keywords: vertical relations, exclusive dealing, two-part tariffs, slotting fees.

Abstract: I study a model in which two upstream firms compete to supply a homogeneous input
to two downstream firms selling differentiated products. Upstream firms offer exclusive,
discriminatory, public, two-part tariff contracts to the downstream firms. I show that,
under very general conditions, this game does not have a pure-strategy subgame-perfect
equilibrium. The intuition is that variable parts in such an equilibrium would have to be
pairwise-stable; however, with pairwise-stable variable parts, downstream competitive
externalities are not internalized, implying that upstream firms can profitably deviate.
I contrast this non-existence result with earlier papers that found equilibria in related
models.

Note: 
Length: 31
Creation-Date: 2024-09
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp591
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2024_591