Exclusive contracts with vertically differentiated products

In this paper we develop a simple model to analyze the effects of exclusive contracts in vertically integrated markets where both the upstream and the downstream market are characterized as oligopolies and manufacturers produce vertically differentiated products. We find that firms prefer to deal exclusively with retailers. If the extent of consumers' heterogeneity is small, manufacturers offer exclusive contracts unilaterally. On the other hand, if consumers' valuations differ significantly both manufacturers engage in exclusive contracting.

Exclusive contracts with private information in successive differentiated oligopolies

The purpose of this article is to analyze the incentives of manufacturers to deal exclusively with retailers in bilaterally duopolistic industries with brand differentiation by manufacturers. In contrast with the previous literature, exclusive contracts are shown to generate higher profits for manufacturers and retailers selling highly differentiated products, who thus have an incentive to insist on exclusive contracting. However, if the products are close substitutes no exclusivity will emerge in equilibrium. Furthermore, we show that exclusive contracts decrease both consumer and social welfare.