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Technological Proximity and Exclusive Buyer-Supplier Relationships
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Chrysovalantou Milliou
Published/Copyright:
July 30, 2008
Abstract
This paper provides a new rationale for why some final product manufacturers develop exclusive relationships with their input suppliers, highlighting the role of investment incentives. It shows that exclusivity can encourage firms' investments in tailoring their technologies to their trading partners. This holds both for the buyer's and the supplier's investments. Furthermore, this paper argues against claims that exclusive dealing agreements are detrimental to welfare by demonstrating that their positive impact on efficiency translates into both higher consumers' surplus and total welfare.
Published Online: 2008-7-30
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Keywords for this article
exclusive dealing;
specific investments;
bargaining;
compatibility
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