Full-line Forcing and Product Assortment in Vertically Related Markets

Abstract

This article highlights that a multi-product manufacturer can use a full-line forcing strategy, that is, tying the sale of its products, to profitably exclude a single-product rival from a retailer's shelf. This happens when its single-product rival is not too efficient and the retailer is capacity constrained. We then study the interplay between the manufacturer's full-line forcing strategy and the retailer's capacity choice. If the retailer can commit itself to carrying all existing products, it prevents any exclusionary effects generated by a full-line forcing strategy. In contrast, if full-line forcing practices are prohibited, the retailer may prefer to strategically restrict the number of products it carries for buyer power motive, which in turn harms welfare. Joint with : Hugo Molina (KU Leven, INRA)