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Exclusive Dealing and the Market Power of Buyers

Author

Listed:
  • Oki Ryoko

    (Graduate School of Economics, University of Tokyo)

  • Yanagawa Noriyuki

    (University of Tokyo)

Abstract

This paper examines the effects of exclusive dealing contracts offered by an incumbent distributor. The traditional literature has focused solely on exclusive dealing contracts offered by incumbent manufacturers, which derive multiple equilibria within homogeneous price competition models. In contrast, exclusive dealing contracts offered by distributors generate unique equilibrium, wherein an efficient entrant can be excluded as long as distributors have sufficient bargaining power. We also introduce an entrant in the manufacturing side, and show that the upstream entry may promote exclusion of the efficient entry by an exclusive dealing contract.

Suggested Citation

  • Oki Ryoko & Yanagawa Noriyuki, 2011. "Exclusive Dealing and the Market Power of Buyers," Asian Journal of Law and Economics, De Gruyter, vol. 2(1), pages 1-25, April.
    • Handle: RePEc:bpj:ajlecn:v:2:y:2011:i:1:n:1
    DOI: 10.2202/2154-4611.1016
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    References listed on IDEAS

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    1. Leslie M. Marx & Greg Shaffer, 2007. "Upfront payments and exclusion in downstream markets," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 823-843, September.
    2. Abito, Jose Miguel & Wright, Julian, 2008. "Exclusive dealing with imperfect downstream competition," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 227-246, January.
    3. Michael D. Whinston & Ilya R. Segal, 2000. "Naked Exclusion: Comment," American Economic Review, American Economic Association, vol. 90(1), pages 296-309, March.
    4. Ryoko Oki & Noriyuki Yanagawa, 2010. "Exclusive Dealing and the Market Power of Buyers," CARF F-Series CARF-F-222, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    5. Ryoko Oki & Noriyuki Yanagawa, 2010. "Exclusive Dealing and the Market Power of Buyers," CIRJE F-Series CIRJE-F-748, CIRJE, Faculty of Economics, University of Tokyo.
    6. B. Douglas Bernheim & Michael D. Whinston, 1998. "Exclusive Dealing," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 64-103, February.
    7. Inderst, Roman & Wey, Christian, 2007. "Buyer power and supplier incentives," European Economic Review, Elsevier, vol. 51(3), pages 647-667, April.
    8. Julian Wright, 2009. "Exclusive Dealing and Entry, When Buyers Compete: Comment," American Economic Review, American Economic Association, vol. 99(3), pages 1070-1081, June.
    9. 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.
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    Cited by:

    1. Hiroshi Kitamura & Noriaki Matsushima & Misato Sato, 2024. "How Does Downstream Firms’ Efficiency Affect Exclusive Supply Agreements?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 64(2), pages 219-242, March.

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