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Entry deterrrence via renegotiation-proof non-exclusive contracts

Author

Listed:
  • Aggey Semenov

    (Department of Economics, University of Ottawa, Ottawa, ON)

  • Julian Wright

    (Department of Economics, National University of Singapour)

Abstract

We establish the entry-deterring role of vertical contracts in a setting that does not rely on asymmetric information, the exclusivity of the incumbent’s contracts, limits on distribution channels, or restrictions on the ability to renegotiate contracts in case of entry. The optimal contract we describe is a three-part quantity discounting contract that involves the payment of an allowance to the downstream firm and a marginal wholesale price below the incumbent’s marginal cost for sufficiently large quantities

Suggested Citation

  • Aggey Semenov & Julian Wright, 2011. "Entry deterrrence via renegotiation-proof non-exclusive contracts," Working Papers 1105E, University of Ottawa, Department of Economics.
    • Handle: RePEc:ott:wpaper:1105e
    as

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    File URL: http://sciencessociales.uottawa.ca/economics/sites/socialsciences.uottawa.ca.economics/files/1105E.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    entry; vertical contracts; exclusivity; renegotiation;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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