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Exclusionary vertical contracts with multiple entrants

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  • Kitamura, Hiroshi
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    Abstract

    This paper constructs a model of anticompetitive exclusive dealing in the presence of multiple entrants. Unlike the single-entrant model in previous literature, an entrant competes not only with the incumbent to deal with buyers but also with other entrants. The competition among entrants then serves as a commitment such that low wholesale prices are offered to buyers when they deviate from exclusive contracts. We argue that this commitment effect becomes a barrier to exclusive dealing and that the results differ drastically from the predictions of the single-entrant framework.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Journal of Industrial Organization.

    Volume (Year): 28 (2010)
    Issue (Month): 3 (May)
    Pages: 213-219

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    Handle: RePEc:eee:indorg:v:28:y:2010:i:3:p:213-219

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    Web page: http://www.elsevier.com/locate/inca/505551

    Related research

    Keywords: Vertical relation Exclusive dealing Multiple entrants Antitrust policy;

    References

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    1. Rasmusen, Eric B & Ramseyer, J Mark & Wiley, John S, Jr, 1991. "Naked Exclusion," American Economic Review, American Economic Association, vol. 81(5), pages 1137-45, December.
    2. Rey, Patrick & Vergé, Thibaud, 2004. "Bilateral Control with Vertical Contracts," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
    3. Julian Wright, 2009. "Exclusive Dealing and Entry, When Buyers Compete: Comment," American Economic Review, American Economic Association, vol. 99(3), pages 1070-81, June.
    4. Chiara Fumagalli & Massimo Motta, 2006. "Exclusive Dealing and Entry, when Buyers Compete," American Economic Review, American Economic Association, vol. 96(3), pages 785-795, June.
    5. Ilya Segal & Michael D. Whinston, 2000. "Exclusive Contracts and Protection of Investments," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 603-633, Winter.
    6. Hart, O. & Tirole, J., 1990. "Vertical Integration And Market Foreclosure," Working papers 548, Massachusetts Institute of Technology (MIT), Department of Economics.
    7. Ashiya, Masahiro, 2000. "Weak entrants are welcome," International Journal of Industrial Organization, Elsevier, vol. 18(6), pages 975-984, August.
    8. Abito, Jose Miguel & Wright, Julian, 2008. "Exclusive dealing with imperfect downstream competition," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 227-246, January.
    9. John Simpson & Abraham L. Wickelgren, 2007. "Naked Exclusion, Efficient Breach, and Downstream Competition," American Economic Review, American Economic Association, vol. 97(4), pages 1305-1320, September.
    10. Michael D. Whinston & Ilya R. Segal, 2000. "Naked Exclusion: Comment," American Economic Review, American Economic Association, vol. 90(1), pages 296-309, March.
    11. Ishibashi, Ikuo, 2003. "A note on credible spatial entry deterrence," International Journal of Industrial Organization, Elsevier, vol. 21(2), pages 283-289, February.
    12. Marvel, Howard P, 1982. "Exclusive Dealing," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 1-25, April.
    13. Andrea Shepard, 1987. "Licensing to Enhance Demand for New Technologies," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 360-368, Autumn.
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    Cited by:
    1. Mikko Packalen, 2011. "Market Share Exclusion," Working Papers 1103, University of Waterloo, Department of Economics, revised Aug 2011.

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