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Exclusive dealing when upstream displacement is possible

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  • Ke Liu
  • Xiaoxuan Meng

Abstract

We study exclusive dealing when the incumbent may be displaced by a more efficient entrant due to the need for a firm to pay a fixed cost to remain active. We show that the incumbent can deter socially efficient entry through exclusive contracts under the one‐buyer‐one‐supplier framework. This result continues to hold in the presence of product differentiation, in which case exclusion is more likely to occur when the efficiency gap between the entrant and the incumbent falls into an intermediate range.

Suggested Citation

  • Ke Liu & Xiaoxuan Meng, 2021. "Exclusive dealing when upstream displacement is possible," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 30(4), pages 830-843, November.
    • Handle: RePEc:bla:jemstr:v:30:y:2021:i:4:p:830-843
    DOI: 10.1111/jems.12442
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    References listed on IDEAS

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    1. Saruta, Fuyuki, 2021. "Exclusive contracts and multihoming agents in two-sided markets," MPRA Paper 110070, University Library of Munich, Germany.
    2. Fuyuki Saruta, 2022. "Exclusive Contracts and Multihoming Agents in Two-sided Markets," Discussion Paper Series DP2022-26, Research Institute for Economics & Business Administration, Kobe University.

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