Exclusivity contracts and competition : the case of the Brazilian fuels market
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Exclusivity contracts can help stations by providing brand-value that allows them to obtain higher proﬁts, relative to unbranded retailers. However, branded retailers may have a stronger negative eﬀect over its competitors’ proﬁts. It is not clear which one of these two eﬀects dominates (brand-value vs competition eﬀect). Therefore, the impact of exclusivity over the number of participants in the downstream market is not determined. In this paper, I empirically study the eﬀects of exclusivity agreements on competition in the Brazilian gasoline sector. In order to do so, I estimate an entry model of endogenous product-type choices using data of retailers’ locations and contract choices along with data from the 2010 Brazilian Census. I use my estimates to simulate entry decisions under two counterfactual scenarios: i) mandatory exclusivity and ii) no exclusivity.