The effects of exclusive contracts on competition in Cournot markets

This thesis deals with the viability and e¤ects of exclusive contracts when Cournot competition is introduced, as opposed to the Bertrand competition that is assumed in the existing literature. An exclusive contracts involves a buyer agreeing to buy a certain part or all of his input from a seller. If he breaches this contract, he has to pay damages. It is found that if a monopolist or multiple sellers in a Cournot monopsony close a (partially) exclusive contract with the buyer, it depends on the method of calcultation of expectation damages whether entry by homogenous competitors will be blocked or not. In a Bertrand upstream monopoly with multiple Cournot retailers and a simultaneous contracting phase, the options to deter entry from a more e¢ cient competitor are limited. Whether entry is deterred at best depends on the perception of each buyer about his competitors. However, entry deterrence is still possible under certain circumstances. Finally, when two upstream Bertrand …rms sell to Cournot retailers and contracting happens sequentially, they can use exclusive contracts to co-exist and both make a pro…t, despite behaving competitively.