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Strategic Buyers and Exclusionary Contracts

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Author Info
Innes, Robert
Sexton, Richard J

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Abstract

This paper characterizes equilibrium exclusionary contracts between buyers, an incumbent firm, and a potential entrant when buyers can either vertically integrate or contract with the outside entrant. In this setting, exclusionary contracts are generally shown to be efficient and to deter inefficient entry that would otherwise occur. With multiple unorganized buyers, equilibrium contracts are shown to take a 'divide-and-conquer' form and, in some cases, to deter some efficient entry. In such cases, efficient contracting can be restored by a policy that prohibits price discrimination and gives agents free reign to sign exclusionary agreements. Copyright 1994 by American Economic Association.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 84 (1994)
Issue (Month): 3 (June)
Pages: 566-84
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Handle: RePEc:aea:aecrev:v:84:y:1994:i:3:p:566-84

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  1. Chris Stefanadis, 1999. "Sunk costs, contestability, and the latent contract market," Staff Reports 75, Federal Reserve Bank of New York. [Downloadable!]
  2. Noriyuki Yanagawa & Ryoko Oki, 2008. "Exclusive Dealing Contract and Inefficient Entry Threat," CIRJE F-Series CIRJE-F-583, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
  3. Landeo, Claudia M. & Spier, Kathryn E., 2007. "Naked Exclusion: An Experimental Study of Contracts with Externalities," MPRA Paper 9143, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  4. Doh Shin Jeon & Domenico Menicucci, 2001. "Optimal Second-degree Price Discrimination and Arbitrage: On the Role of Asymetric Information among Buyers," Economics Working Papers 624, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 2005. [Downloadable!]
    Other versions:
  5. Moen, Espen R & Riis, Christian, 2005. "Efficient Exclusion," CEPR Discussion Papers 5257, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. Andrew Kleit, 2001. "Creating a Public Good to Fight Monopolization: The Formation of Broadcast Music, Inc," Review of Industrial Organization, Springer, vol. 19(2), pages 243-256, September. [Downloadable!] (restricted)
  7. Eric B. Rasmusen & J. Mark Ramseyer & John Shepard Wiley Jr., 2000. "Naked Exclusion: Reply," American Economic Review, American Economic Association, vol. 90(1), pages 310-311, March. [Downloadable!] (restricted)
    Other versions:
  8. Eric Malin & David Martimort, 2001. "Les limites à la discrimination par les prix," Annales d'Economie et de Statistique, ADRES, issue 62, pages 11, Avril-Jui. [Downloadable!]
    Other versions:
  9. Ilya R. Segal & Michael D. Whinston, 2000. "Naked Exclusion: Comment," American Economic Review, American Economic Association, vol. 90(1), pages 296-309, March. [Downloadable!] (restricted)
  10. Mattoo, Aaditya, 1999. "Can no antitrust policy be better than some antitrust policy?," Policy Research Working Paper Series 2191, The World Bank. [Downloadable!]
  11. Yeon-Koo Che & Kathryn E. Spier, 2007. "Exploiting Plaintiffs Through Settlement: Divide and Conquer," Discussion Papers 0607-18, Columbia University, Department of Economics. [Downloadable!]
    Other versions:
  12. Garance Genicot & Debraj Ray, 2003. "Contracts and Externalities: How Things Fall Apart," Levine's Bibliography 506439000000000235, UCLA Department of Economics. [Downloadable!]
    Other versions:
  13. Ellingsen, Tore, 1995. "Long Term Contracts, Arbitrage, and Vertical Restraints," Working Paper Series in Economics and Finance 58, Stockholm School of Economics. [Downloadable!]
  14. Karlinger, Liliane & Motta, Massimo, 2007. "Exclusionary Pricing and Rebates When Scale Matters," CEPR Discussion Papers 6258, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  15. Marín Uribe, Pedro Luis, 2001. "Exclusive Contracts and Market Power: Evidence from Ocean Shipping," CEPR Discussion Papers 2828, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  16. William Comanor & Patrick Rey, 2000. "Vertical Restraints and the Market Power of Large Distributors," Review of Industrial Organization, Springer, vol. 17(2), pages 135-153, September. [Downloadable!] (restricted)
  17. David Spector, 2007. "Exclusive contracts and demand foreclosure," PSE Working Papers 2007-07, PSE (Ecole normale supérieure). [Downloadable!]
  18. Rey, Patrick & Tirole, Jean, 2007. "Financing and Access in Cooperatives," IDEI Working Papers 404, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
  19. Klein, Joachim & Zenger, Hans, 2009. "Predatory Exclusive Dealing," Discussion Papers in Economics 10626, University of Munich, Department of Economics. [Downloadable!]
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