Upfront payments and exclusion in downstream markets

Marx, Leslie M and Shaffer, Greg (2007) Upfront payments and exclusion in downstream markets. RAND Journal of Economics, 38 (3). pp. 823-843. ISSN 1756-2171

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Although upfront payments are often observed in contracts between manufacturers and retailers, little is known about their competitive effects or the role retailers play in securing them. In this article, we consider a model in which two competing retailers make take-it-or-leave-it offers to a common manufacturer. We find that upfront payments are a feature of equilibrium contracts, and in all equilibria, only one retailer buys from the manufacturer. These findings support the claims of small manufacturers who argue that they are often unable to obtain widespread distribution for their products because of upfront payments. Copyright © 2007, RAND.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > Norwich Business School
Depositing User: Nicola Secker
Date Deposited: 01 Apr 2011 07:59
Last Modified: 02 Feb 2023 11:30
URI: https://ueaeprints.uea.ac.uk/id/eprint/27821
DOI: 10.1111/j.0741-6261.2007.00114.x

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