Competition with Exclusive Contracts in Vertically Related Markets: An Equilibrium Non-Existence Result

Arbeitspapier

I develop a model in the spirit of Ordover, Saloner, and Salop (1990), in which two upstream firms compete to supply a homogeneous input to two downstream firms, who compete in prices with differentiated products in a downstream market. Upstream firms are allowed to offer exclusive two-part tariff contracts to the downstream firms. I show that, under very general conditions, this game does not have a subgame-perfect equilibrium in pure strategies. The intuition is that variable parts in such an equilibrium would have to be pairwise-proof. But when variable parts are pairwise-proof, downstream competitive externalities are not internalized, and there exists a profitable deviation. I contrast this non-existence result with earlier papers that found equilibria in similar models.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SFB/TR 15 Discussion Paper ; No. 439

Classification and Topics

• Classification: Wirtschaft

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schutz, Nicolas
• Event: Veröffentlichung
• (who): Sonderforschungsbereich/Transregio 15 - Governance and the Efficiency of Economic Systems (GESY)
• (where): München
• (when): 2013

Further information

• DOI: doi:10.5282/ubm/epub.17398
• Handle: http://hdl.handle.net/10419/93995
• URN: urn:nbn:de:bvb:19-epub-17398-5
• Last update: 10.03.2025, 11:46 AM CET