We study the optimal contract choice of an upstream monopolist producing an essential input that may sell to two … vertically differentiated downstream firms. The upstream supplier can offer an exclusive contract to one of the firms or non … upstream supplier and the rival downstream firm. The distribution of bargaining power during the contract terms negotiations is …

multiplicative separability condition, the optimal mechanism offers a single contract. This condition holds, for example, when output … likelihood ratio property, the mechanism offers a single debt contract. Our results generalize if the output distribution is … “close” to multiplicatively separable. Our model suggests that offering a single contract may be optimal in environments with …

addition, the paper finds that it is feasible in the monopoly optimum that the bundle for low-demand agents is more expensive …