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Abstract

A firm may decide to have some of its customers sign exclusive contracts in order to deprive a rival of the minimum viable size, exclude it from the market, and enjoy increased market power. If contracts are required to be simple enough, this strategy may induce inefficient exclusion even if the excluded firm is present at the contracting stage. Exclusive contracts may thus cause inefficient eviction, not only entry-deterrence, even though the former is less likely than the latter. However, complex enough contracts, if feasible, would allow agents to reach a Pareto-optimum, without inefficient exclusion.

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Paper provided by HAL in its series PSE Working Papers with number halshs-00588311.

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Date of creation: Mar 2007
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Handle: RePEc:hal:psewpa:halshs-00588311

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Related research

Keywords: exclusive dealing ; foreclosure ; exclusionary strategies;

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References

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1. B. Douglas Bernheim & Michael D. Whinston, 1996. "Exclusive Dealing," NBER Working Papers 5666, National Bureau of Economic Research, Inc.
   
   • B. Douglas Bernheim & Michael D. Whinston, 1998. "Exclusive Dealing," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 64-103, February.
   • Bernheim, B.D., 1992. "Exclusive Dealing," Harvard Institute of Economic Research Working Papers 1622, Harvard - Institute of Economic Research.
   • B. Douglas Bernheim & Michael D. Whinston, . "Exclusive Dealing," Working Papers 96008, Stanford University, Department of Economics.
2. Segal, Ilya, 2003. "Coordination and discrimination in contracting with externalities: divide and conquer?," Journal of Economic Theory, Elsevier, vol. 113(2), pages 147-181, December.
3. Ilya Segal, 1999. "Contracting With Externalities," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 337-388, May.
4. Krattenmaker, Thomas G & Salop, Steven C, 1986. "Competition and Cooperation in the Market for Exclusionary Rights," American Economic Review, American Economic Association, vol. 76(2), pages 109-13, May.
5. Bernheim, B. Douglas & Peleg, Bezalel & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria I. Concepts," Journal of Economic Theory, Elsevier, vol. 42(1), pages 1-12, June.
6. Schwartz, Marius, 1987. "The Competitive Effects of Vertical Agreements: Comment," American Economic Review, American Economic Association, vol. 77(5), pages 1063-68, December.
7. Michael D. Whinston & Ilya R. Segal, 2000. "Naked Exclusion: Comment," American Economic Review, American Economic Association, vol. 90(1), pages 296-309, March.
8. Fumagalli, Chiara & Motta, Massimo, 2002. "Exclusive Dealing and Entry, when Buyers Compete," CEPR Discussion Papers 3493, C.E.P.R. Discussion Papers.
   
   • 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.
9. Richard Gilbert, 2000. "Exclusive Dealing, Preferential Dealing, and Dynamic Efficiency," Review of Industrial Organization, Springer, vol. 16(2), pages 167-184, March.
10. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
11. 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.
12. Ordover, Janusz A & Saloner, Garth & Salop, Steven C, 1990. "Equilibrium Vertical Foreclosure," American Economic Review, American Economic Association, vol. 80(1), pages 127-42, March.
13. Marvel, Howard P, 1982. "Exclusive Dealing," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 1-25, April.
14. Innes, Robert & Sexton, Richard J, 1994. "Strategic Buyers and Exclusionary Contracts," American Economic Review, American Economic Association, vol. 84(3), pages 566-84, June.
15. Ilya Segal & Michael D. Whinston, 2003. "Robust Predictions for Bilateral Contracting with Externalities," Econometrica, Econometric Society, vol. 71(3), pages 757-791, 05.
16. Gans, Joshua S. & King, Stephen P., 2002. "Exclusionary contracts and competition for large buyers," International Journal of Industrial Organization, Elsevier, vol. 20(9), pages 1363-1381, November.
17. Michael D. Whinston, 2001. "Exclusivity and Tying in U.S. v. Microsoft: What We Know, and Don't Know," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 63-80, Spring.
18. Daniel P. O'Brien & Greg Shaffer, 1997. "Nonlinear Supply Contracts, Exclusive Dealing, and Equilibrium Market Foreclosure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(4), pages 755-785, December.
19. Dennis W. Carlton, 2001. "A General Analysis of Exclusionary Conduct and Refusal to Deal - Why Aspen and Kodak are Misguided," NBER Working Papers 8105, National Bureau of Economic Research, Inc.
20. 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.
21. Mathewson, G Frank & Winter, Ralph A, 1987. "The Competitive Effects of Vertical Agreements: Comment," American Economic Review, American Economic Association, vol. 77(5), pages 1057-62, December.

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Cited by:

1. Bijlsma, Michiel & Boone, Jan & Zwart, Gijsbert, 2009. "Selective contracting and foreclosure in health care markets," CEPR Discussion Papers 7576, C.E.P.R. Discussion Papers.
   
   • Bijlsma, M. & Boone, J. & Zwart, G., 2009. "Selective Contracting and Foreclosure in Health Care Markets," Discussion Paper 2009-89, Tilburg University, Center for Economic Research.
   • Michiel Bijlsma & Jan Boone & Gijsbert Zwart, 2010. "Selective contracting and foreclosure in health care markets," CPB Discussion Paper 140, CPB Netherlands Bureau for Economic Policy Analysis.
2. Boone, Jan & Müller, Wieland & Suetens, Sigrid, 2009. "Naked exclusion: Towards a behavioral approach to exclusive dealing," CEPR Discussion Papers 7303, C.E.P.R. Discussion Papers.
   
   • Boone, J. & Müller, W. & Suetens, S., 2009. "Naked Exclusion: Towards a Behavioral Approach to Exclusive Dealing," Discussion Paper 2009-017, Tilburg University, Tilburg Law and Economic Center.
   • 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.
3. Argenton, C., 2008. "Exclusive Quality," Discussion Paper 2008-20, Tilburg University, Center for Economic Research.
   
   • Argenton, Cédric, 2006. "Exclusive Quality," Working Paper Series in Economics and Finance 640, Stockholm School of Economics, revised 17 Nov 2006.
   • Argenton, C., 2008. "Exclusive Quality," Discussion Paper 2008-007, Tilburg University, Tilburg Law and Economic Center.
4. Yaron Yehezkel, 2008. "Retailers' choice of product variety and exclusive dealing under asymmetric information," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 115-143.
5. Klein, Joachim & Zenger, Hans, 2009. "Predatory Exclusive Dealing," Discussion Papers in Economics 10626, University of Munich, Department of Economics.
6. Michiel Bijlsma & Gijsbert Zwart, 2009. "Competition for access; spectrum rights and downstream access in wireless telecommunications," CPB Discussion Paper 123, CPB Netherlands Bureau for Economic Policy Analysis.
7. Mikko Packalen, 2011. "Market Share Exclusion," Working Papers 1103, University of Waterloo, Department of Economics, revised Aug 2011.

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