In an important paper, Aghion and Bolton (1987) argue that a buyer and a seller may agree on high liquidation damages in order to extract rents from future suppliers. As this may distort future trade, it may be socially wasteful. We argue that Aghion and Bolton's analysis is incomplete in some...

There is a substantial theoretical literature on the potential effects of loyalty contracts, but a relative paucity of empirical work. This Paper employs the event study methodology to examine the effect of exclusionary contracts on firm performance in the ocean shipping industry. Shipping...

We model a new effect of exclusivity on non-contractible investments in buyer/seller relationships. By restricting the buyer to purchase from only one seller, exclusivity increases the buyer’s costs of haggling during renegotiation and hence the seller’s relative bargaining power and...

This paper analyses the impact of competition among downstream firms on an upstream firm's payoff and on its incentive to vertically integrate when firms on both segments negotiate optimal contracts. We argue that tougher competition decreases the downstream industry profit, but improves the...

We consider an incumbent firm and a more efficient entrant, both offering a network good to several asymmetric buyers. The incumbent disposes of an installed base, while the entrant has a network of size zero at the outset, and needs to attract a critical mass of buyers to operate. We analyze...

We investigate the robustness of the new foreclosure doctrine and its associated welfare implications to the introduction of incomplete information. In particular, we let the upstream firm’s marginal cost be private information, unknown to the downstream firms. The previous literature has...

In a vertical market in which downstream firms have private information about their productivity and compete for consumers, an upstream firm posts public bilateral contracts. When downstream firms are risk-neutral without wealth constraints, the upstream firm offers the input to all retailers....

This model describes the working of hub-and-spoke collusion that has been discussed recently by competition policy authorities. We develop a model of tacit collusion between a manufacturer and two retailers, competing a la Rotemberg and Saloner (1986). The best collusive equilibrium between...

Exclusive dealing contracts between manufacturers and retailers force new entrants to set up their own costly dealer networks to enter the market. We ask whether such contracts may act as an entry barrier, and provide an empirical analysis of the European car market. We first estimate a demand...

The paper discusses economic theories of harm for anti-competitive margin squeeze by unregulated and regulated vertically integrated firms. We review both predation and foreclosure theories, as well as the mere exploitation of upstream market power. We show that foreclosure provides an...