Editing Exclusive dealing (section)

== Buyer induced exclusive dealing ==

Exclusive dealing is commonly known as a supplier induced act, however the buyer has the power to influence exclusive dealing through multiple methods.<ref>{{cite journal|last1=Miklós-Thal|first1=Jeanine|last2=Rey|first2=Patrick|last3=Vergé|first3=Thibaud|title=Buyer Power and Intrabrand Coordination |journal=[[Journal of the European Economic Association]]|date=August 2011|volume=9|issue=4|pages=721–741|jstor=25836087|doi=10.1111/j.1542-4774.2011.01019.x|url=http://publications.ut-capitole.fr/988/1/rey_988.pdf }}</ref> At the manufacturing point, there is more market influence downstream than upstream in certain distribution networks because "consumers are more likely to switch products inside the supermarket than switch brand stores".<ref>{{cite journal|title=The nature of vertical restraints|last=Steiner|first=Robert L.|doi=10.1177/0003603X8503000107|date=Spring 1985|journal=The Antitrust Bulletin|volume=30|number=1|pages=143–179|s2cid=152605810 }}</ref> Dobson (2008) noted that "buyer-led constraints most frequently occur when the buyer has some negotiating advantage over suppliers that guarantees their compliance or consent.<ref>{{cite book|title=Issues in competition law and policy|last=Collins|first=Wayne D.|volume=1|publisher=ABA Book Publishing|year=2008|isbn=9781604420449|ol=OL30688635M}}</ref>

The consumer-welfare consequences of exclusive dealings caused by buyers are not apparent. If a dealer sticks to a single supplier of a marketed consumer product, exclusive dealing decreases the options of customers.<ref>{{cite journal|last=Steuer|first=Richard M.|title=Customer-Instigated Exclusive Dealing |year=2000|journal=[[Antitrust Law Journal]]|volume=68|number=2|pages=239–251|jstor=40843468}}</ref> Those customers who may not find their favourite brand in stock at a retailer must either choose a different brand or a different retailer in the face of restricted brand availability. It is true that reducing the selection of choices is harmful to the welfare of customers, but it is also possible that this form of exclusion is possible.<ref name="mills"/>

There have been two investigations to prove the existence of buyer induced exclusive dealing by Gabrielsen and Sørgard (1999)<ref name="staahl">{{cite journal|title=Discount Chains and Brand Policy|last1=Staahl Gabrielsen|first1=Tommy|last2=Sørgard|first2=Lars|journal=[[The Scandinavian Journal of Economics]]|date=March 1999|volume=101|number=1|pages=127–142|doi=10.1111/1467-9442.00145 |jstor=3440572}}</ref> as well as Klein and Murphy (2008) <ref name="kleinmurphy">{{cite journal|last1=Klein|first1=Benjamin|last2=Murphy|first2=Kevin M.|title=Exclusive Dealing Intensifies Competition for Distribution |year=2008|journal=[[Antitrust Law Journal]]|volume=75|number=2|pages=433–466|jstor=27897584|ssrn=1656635}}</ref> Investigate purchaser-induced exclusive dealings with a monopoly manufacturer and two suppliers of a distinct commodity. In the model Gabrielsen and Sørgard (1999) suggests that the retailer chooses, ex ante, whether to solicit exclusive or non-exclusive delivery bids from suppliers. Wholesale rates are, in any case, dictated by [[Bertrand competition]] model between suppliers. Next, the retailer marks up selling rates for resale to buyers in a double-marginalization strategy. The retailer can opt for an exclusive trading deal with one of the manufacturers, based on customer demand for the brands<ref name="staahl"/> and Klein and Murphy (2008).<ref name="kleinmurphy"/>

Klein and Murphy (2008)<ref name="kleinmurphy"/>'s model suggests that "the retailer has buyer control in the upstream market but faces downstream competition in a model of one retailer and two suppliers with a differentiated commodity." Competitors persuade the firm to charge retail rates that barely cover operational costs. The model also assumes that the retailer distributes single brand products. The model also indicates that there is no incentive for the retailer to attempt or pursue the distribution of products form more than one manufacturer, as the retailer will conduct a procurement auction to determine the product it will distribute. This situation leads to the utilisation of the [[Bertrand competition]] to drive wholesale prices down as well as manufacturers costs.<ref name="kleinmurphy"/>