Non-Exclusive Dealing with Retailer Differentiation and Market Penetration

Retailer differentiation exists in most industries and gives manufacturers an incentive to contract with different retailers to penetrate a market. This paper analyzes the impact of this penetration effect on vertical contract exclusivity in an oligopolistic model with differentiated retailers. In the model, manufacturers endogenously choose contract types and negotiate with retailers on wholesale prices. We show that, when the penetration...