What are exclusivity agreements in the ice cream industry?
exclusive purchasing agreement:
Retailers can only sell ice cream directly supplied by the manufacturer
Freezer exclusivity:
Manufacturers provide freezers, and retailers can only store that manufacturer’s ice cream in them
What is the SSNIP test used for
It ckecks if a hypothetical monopolist could increase prices by 5-10% without consumers switching to alternatives
What are foreclosing effects
foreclosing effects are “Wettbewerbshindernisse” and block new competitors from market entry by limiting access to to distribution or costumers through exclusivity agreements
What are the foreclosing effects of exclusivity clauses in the ice cream industry
Retailers are reluctant to install additional freezers due to space limitations
Substantial fixed and sunk costs are required to build distribution and brand reputation
New entrants face challenges replacing established suppliers
Why are exclusivity clauses a concern for market competition?
they make it difficult for new entrants to gain market access
They restrict retailers’ ability to sell competing products
What are sunk costs, and why are they significant in the ice cream industry?
sunk costs are fixed investments that cannot be recovered once made
They include costs for establishing distribution systems and building brand reputation, which are high in the ice cream market
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