Do Vertical Contracts Lead to Foreclosure and Efficiency Gains? An Empirical Study of the Food and Beverage Industry

Silvia Bertarelli

doi:10.19044/esj.2024.v20n13p1

Silvia Bertarelli Department of Economics and Management, University of Ferrara, Italy

DOI: https://doi.org/10.19044/esj.2024.v20n13p1

Keywords: Vertical restraint, market dominance, heterogeneous productivity

Abstract

This paper focuses on presenting a research methodology to determine whether vertical contracts between firms operating at different levels of the supply chain are efficient from the perspective of recent industrial organisation theory. In this perspective, some case studies were presented concerning antitrust investigations against some large companies operating in the food and beverage sector in Italy. Despite the controversy surrounding the effects of vertical agreements, as they may be pro- or anti-competitive, the paper shows that not only market concentration but also intra-sectoral asymmetries are crucial factors to consider in distinguishing between foreclosing and efficiency-enhancing agreements.

Downloads

Download data is not yet available.

Metrics

Metrics Loading ...

PlumX Statistics

References

1. Aghion, P. & Bolton, P. (1987). Contracts as barrier to entry. American Economic Review, 77(3), 388-401.
2. Bernheim, B.D. & Whinston, M.D. (1998). Exclusive Dealing. Journal of Political Economy, 106(1), 64-103.
3. Besanko, D. & Perry, M.K. (1993). Equilibrium incentives for exclusive dealing in a differentiated products oligopoly. RAND Journal of Economics, 24(4), 646-667.
4. Calzolari, G. & Denicolò, V. (2015). Exclusive contracts and market dominance. American Economic Review, 105(11), 3321-51.
5. De Meza, D. & Selvaggi, M. (2007). Exclusive contracts foster relationship-specific investment. RAND Journal of Economics, 38(1), 85-97
6. Etro, F. (2007). Competition, Innovation, and Antitrust. Springer.
7. Fumagalli, C., Motta, M., & Ronde, T. (2012). Exclusive dealing: the interaction between foreclosure and investment promotion. Journal of Industrial Economics, 60(4), 599-608.
8. Groh, C. & Spagnolo, G. (2004). Exclusive contracts, loss to delay and incentives to invest. CEPR discussion paper No. 4525.
9. O'Brien, D.P. (2020). The economics of vertical restraints in digital markets. The Global Antitrust Institute Report on the Digital Economy. Retrieved at: http://dx.doi.org/10.2139/ssrn.3733686
10. Rasmusen, E.B., Ramseyer, J.M., & Wiley, J. S, Jr. (1991). Naked exclusion. American Economic Review, 81(5), 1137-1145.
11. Rey, P. & Vergé, T. (2008). The economics of vertical restraints, in P: Buccirossi (Ed.), Handbook of Antitrust Economics (pp. 353–390) Cambridge, MA: MIT Press.
12. Segal, I.R. & Whinston, M.D. (2000). Naked Exclusion: comment. American Economic Review, 90(1), 296-309.