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Exclusive Contracts under Financial Constraints

Author

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  • Kitamura Hiroshi

    (Sapporo Gakuin University)

Abstract

This paper constructs a model of anticompetitive exclusive dealing in the presence of financial constraints. Because of the presence of these constraints, the incumbent cannot remain in business if a deviant buyer appears. We argue that the existence of financial constraints eliminates the buyer's profit in deviating from exclusive contracts. As a result, when compared with previous studies, the possibility of exclusion increases. That is, exclusion arises, even when buyers compete less intensively.

Suggested Citation

  • Kitamura Hiroshi, 2011. "Exclusive Contracts under Financial Constraints," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-31, September.
    • Handle: RePEc:bpj:bejeap:v:11:y:2011:i:1:n:57
    DOI: 10.2202/1935-1682.2677
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    References listed on IDEAS

    as
    1. Motta, Massimo & Persson, Lars & Fumagalli, Chiara, 2005. "Exclusive Dealing, Entry and Mergers," CEPR Discussion Papers 4902, C.E.P.R. Discussion Papers.
    2. Kitamura, Hiroshi, 2010. "Exclusionary vertical contracts with multiple entrants," International Journal of Industrial Organization, Elsevier, vol. 28(3), pages 213-219, May.
    3. Cédric Argenton, 2010. "Exclusive Quality," Journal of Industrial Economics, Wiley Blackwell, vol. 58(3), pages 690-716, September.
    4. Wright, Julian, 2008. "Naked exclusion and the anticompetitive accommodation of entry," Economics Letters, Elsevier, vol. 98(1), pages 107-112, January.
    5. Jan Boone & Wieland Müller & Sigrid Suetens, 2014. "Naked Exclusion in the Lab: The Case of Sequential Contracting," Journal of Industrial Economics, Wiley Blackwell, vol. 62(1), pages 137-166, March.
    6. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
    7. Rasmusen, Eric B & Ramseyer, J Mark & Wiley, John S, Jr, 1991. "Naked Exclusion," American Economic Review, American Economic Association, vol. 81(5), pages 1137-1145, December.
    8. Yong, Jong-Say, 1999. "Exclusionary Vertical Contracts and Product Market Competition," The Journal of Business, University of Chicago Press, vol. 72(3), pages 385-406, July.
    9. Julian Wright, 2009. "Exclusive Dealing and Entry, When Buyers Compete: Comment," American Economic Review, American Economic Association, vol. 99(3), pages 1070-1081, June.
    10. 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.
    11. Claudia M. Landeo & Kathryn E. Spier, 2009. "Naked Exclusion: An Experimental Study of Contracts with Externalities," American Economic Review, American Economic Association, vol. 99(5), pages 1850-1877, December.
    12. David Meza & Mariano Selvaggi, 2007. "Exclusive contracts foster relationship-specific investment," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 85-97, March.
    13. Smith, Angela M., 2011. "An experimental study of exclusive contracts," International Journal of Industrial Organization, Elsevier, vol. 29(1), pages 4-13, January.
    14. 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.
    15. John Simpson & Abraham L. Wickelgren, 2007. "Naked Exclusion, Efficient Breach, and Downstream Competition," American Economic Review, American Economic Association, vol. 97(4), pages 1305-1320, September.
    16. de Fontenay, Catherine C. & Gans, Joshua S. & Groves, Vivienne, 2010. "Exclusivity, competition and the irrelevance of internal investment," International Journal of Industrial Organization, Elsevier, vol. 28(4), pages 336-340, July.
    17. Marvel, Howard P, 1982. "Exclusive Dealing," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 1-25, April.
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    Citations

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    Cited by:

    1. Hiroshi Kitamura & Misato Sato & Koki Arai, 2014. "Exclusive contracts when the incumbent can establish a direct retailer," Journal of Economics, Springer, vol. 112(1), pages 47-60, May.
    2. Kitamura, Hiroshi & Matsushima, Noriaki & Sato, Misato, 2018. "Exclusive contracts with complementary inputs," International Journal of Industrial Organization, Elsevier, vol. 56(C), pages 145-167.
    3. 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.
    4. repec:dpr:wpaper:0878 is not listed on IDEAS
    5. Hiroshi Kitamura & Akira Miyaoka & Misato Sato, 2016. "Relationship-specific investment as a barrier to entry," Journal of Economics, Springer, vol. 119(1), pages 17-45, September.
    6. repec:dpr:wpaper:0918 is not listed on IDEAS

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