Contracting, Exclusivity and Incomplete Distribution Networks

Whereas in some industries retailers distribute the products of all suppliers, in other industries they differentiate themselves from their rivals by becoming the exclusive distributors of some products, which results in incomplete distribution networks. To study this phenomenon, I analyze a model where retailers first play a decentralized, multilateral contracting game with suppliers and then compete in the downstream market. I use this model to study the equilibrium structure of distribution networks under different assumptions regarding supplier and retailer differentiation, the mode of downstream competition, the availability of exclusive contracts and two-part tariffs, and the presence of hold-up in negotiations