Buyers’ miscoordination, entry, and downstream competition
AbstractThis paper shows that buyers’ coordination failures might prevent entry in an industry with an incumbent firm and a more efficient potential entrant. If there was a single buyer, or if all buyers formed a central purchasing agency, coordination failures would be avoided and efficient entry would always occur. More generally, exclusion is the less likely the lower the number of buyers. For any given number of buyers, exclusion is the less likely the more fiercely buyers compete in the downstream market. First, intense competition may prevent miscoordination equilibria from arising; second, in cases where miscoordination equilibria still exist, it lowers the maximum price that the incumbent can sustain at such exclusionary equilibria
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Bibliographic InfoPaper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 152.
Date of creation: 01 Jan 2006
Date of revision:
Publication status: Published in The Economic Journal, 118(531), pp. 1196-1222, August 2008
Countervailing Power; Exclusion; Buyers’ Fragmentation;
Other versions of this item:
- Chiara Fumagalli & Massimo Motta, 2008. "Buyers' Miscoordination, Entry and Downstream Competition," Economic Journal, Royal Economic Society, vol. 118(531), pages 1196-1222, 08.
- D4 - Microeconomics - - Market Structure and Pricing
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
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