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Exclusive Dealing and Entry, when Buyers Compete

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Author Info
Fumagalli, Chiara
Motta, Massimo

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Abstract

Rasmusen et al. (1991) and Segal and Whinston (2000) show that an incumbent monopolist might exclude entry of a more efficient competitor, by exploiting externalities among buyers. We show that their results hold only when downstream competition among buyers does not exist or is weak enough. Under fierce downstream competition, the incumbent cannot compensate a deviant buyer who buys from the more efficient entrant. Any such buyer will become more competitive and increase their output – thus triggering entry – and profits at the expense of buyers who sign an exclusive deal with the incumbent. Hence, exclusive deals cannot deter efficient entry.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3493.

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Date of creation: Aug 2002
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Handle: RePEc:cpr:ceprdp:3493

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Related research
Keywords: anticompetitive behaviour; buyers' coordination; foreclosure;

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Find related papers by JEL classification:
K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Stefanadis, Christodoulos, 1998. "Selective Contracts, Foreclosure, and the Chicago School View," Journal of Law & Economics, University of Chicago Press, vol. 41(2), pages 429-50, October.
  2. 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)
  3. Fumagalli, Chiara & Motta, Massimo, 2002. "Exclusive Dealing and Entry, when Buyers Compete," CEPR Discussion Papers 3493, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
  5. Ilya R. Segal & Michael D. Whinston, 1996. "Naked Exclusion and Buyer Coordination," Harvard Institute of Economic Research Working Papers 1780, Harvard - Institute of Economic Research.
  6. 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. [Downloadable!] (restricted)
  7. B. Douglas Bernheim & Michael D. Whinston, 1998. "Exclusive Dealing," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 64-103, February. [Downloadable!] (restricted)
    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Fumagalli, Chiara & Motta, Massimo & Persson, Lars, 2007. "On the Anticompetitive Effect of Exclusive Dealing when Entry by Merger is Possible," Working Paper Series 718, Research Institute of Industrial Economics. [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. Michiel Bijlsma & Viktoria Kocsis & Victoria Shestalova & Gijsbert Zwart, 2008. "Vertical foreclosure, a policy framework," CPB Documents 157, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  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. [Downloadable!]
    Other versions:
  5. 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:
  6. John Vickers, 2007. "Some Economics of Abuse of Dominance," Economics Series Working Papers 376, University of Oxford, Department of Economics. [Downloadable!]
  7. Argenton, Cédric, 2006. "Exclusive Quality," Working Paper Series in Economics and Finance 640, Stockholm School of Economics, revised 17 Nov 2006. [Downloadable!]
    Other versions:
  8. 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:
  9. Hiroshi Kitamura, 2008. "Exclusionary Vertical Contracts with Multiple Entrants," Discussion Papers in Economics and Business 08-39, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP). [Downloadable!]
  10. Chrysovalantou Milliou, 2004. "Exclusive Dealing And Compatibility Of Investments," Economics Working Papers we044919, Universidad Carlos III, Departamento de Economía. [Downloadable!]
  11. Boone, J. & Müller, W. & Suetens, S., 2009. "Naked Exclusion: Towards a Behavioral Approach to Exclusive Dealing," Discussion Paper 2009-30, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  12. Fumagalli, Chiara & Motta, Massimo & Rønde, Thomas, 2009. "Exclusive dealing: the interaction between foreclosure and investment promotion," CEPR Discussion Papers 7240, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  13. Ryoko Oki & Noriyuki Yanagawa, 2009. "Exclusive Dealing and Large Distributors," CIRJE F-Series CIRJE-F-626, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
  14. Selvaggi, Marianao & Vasconcelos, Luis, 2006. "Star Wars: Exclusive Superstars and Collusive Outcomes," FEUNL Working Paper Series wp496, Universidade Nova de Lisboa, Faculdade de Economia. [Downloadable!]
  15. Chiara Fumagalli & Massimo Motta, 2006. "Buyers’ miscoordination, entry, and downstream competition," CSEF Working Papers 152, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
    Other versions:
  16. David Spector, 2007. "Exclusive contracts and demand foreclosure," PSE Working Papers 2007-07, PSE (Ecole normale supérieure). [Downloadable!]
  17. Klein, Joachim & Zenger, Hans, 2009. "Predatory Exclusive Dealing," Discussion Papers in Economics 10626, University of Munich, Department of Economics. [Downloadable!]
  18. Stennek, Johan, 2007. "Exclusive Quality - Why Exclusive Distribution May Benefit the TV Viewers," CEPR Discussion Papers 6072, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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