Exclusive Dealing and Entry, when Buyers Compete
AbstractRasmusen 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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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3493.
Date of creation: Aug 2002
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Other versions of this item:
- 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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- NEP-IND-2003-03-14 (Industrial Organization)
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CEPR Discussion Papers
3493, C.E.P.R. Discussion Papers.
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