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Exclusionary vertical contracts with multiple entrants

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  • Kitamura, Hiroshi

Abstract

This paper constructs a model of anticompetitive exclusive dealing in the presence of multiple entrants. Unlike the single-entrant model in previous literature, an entrant competes not only with the incumbent to deal with buyers but also with other entrants. The competition among entrants then serves as a commitment such that low wholesale prices are offered to buyers when they deviate from exclusive contracts. We argue that this commitment effect becomes a barrier to exclusive dealing and that the results differ drastically from the predictions of the single-entrant framework.

Suggested Citation

  • Kitamura, Hiroshi, 2010. "Exclusionary vertical contracts with multiple entrants," International Journal of Industrial Organization, Elsevier, vol. 28(3), pages 213-219, May.
  • Handle: RePEc:eee:indorg:v:28:y:2010:i:3:p:213-219
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    References listed on IDEAS

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    1. repec:bin:bpeajo:v:21:y:1990:i:1990-3:p:205-286 is not listed on IDEAS
    2. 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.
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    6. 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.
    7. 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.
    8. Ishibashi, Ikuo, 2003. "A note on credible spatial entry deterrence," International Journal of Industrial Organization, Elsevier, vol. 21(2), pages 283-289, February.
    9. Patrick Rey & Thibaud Vergé, 2004. "Bilateral Control with Vertical Contracts," RAND Journal of Economics, The RAND Corporation, vol. 35(4), pages 728-746, Winter.
    10. Marvel, Howard P, 1982. "Exclusive Dealing," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 1-25, April.
    11. Ashiya, Masahiro, 2000. "Weak entrants are welcome," International Journal of Industrial Organization, Elsevier, vol. 18(6), pages 975-984, August.
    12. 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.
    13. Oliver Hart & Jean Tirole, 1990. "Vertical Integration and Market Foreclosure," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1990 Micr), pages 205-286.
    14. David Meza & Mariano Selvaggi, 2007. "Exclusive contracts foster relationship-specific investment," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 85-97, March.
    15. Michael D. Whinston & Ilya R. Segal, 2000. "Naked Exclusion: Comment," American Economic Review, American Economic Association, vol. 90(1), pages 296-309, March.
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    Citations

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    Cited by:

    1. 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.
    2. Hiroshi Kitamura & Noriaki Matsushima & Misato Sato, 2013. "How Does Downstream Firms' Efficiency Affect Exclusive Supply Agreements?," ISER Discussion Paper 0878r, Institute of Social and Economic Research, Osaka University, revised Sep 2015.
    3. Elhauge, Einer & Wickelgren, Abraham L., 2015. "Robust exclusion and market division through loyalty discounts," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 111-121.
    4. Gratz, Linda & Reisinger, Markus, 2013. "On the competition enhancing effects of exclusive dealing contracts," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 429-437.
    5. Muriel Fadairo & Jianyu Yu, 2014. "Economic Rationales of Exclusive Dealing ; Empirical Evidence from the French Distribution Networks," Working Papers 1405, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    6. Hiroshi Kitamura & Noriaki Matsushima & Misato Sato, 2018. "Naked exclusion under exclusive-offer competition," ISER Discussion Paper 1021, Institute of Social and Economic Research, Osaka University.
    7. Mikko Packalen, 2011. "Market Share Exclusion," Working Papers 1103, University of Waterloo, Department of Economics, revised Aug 2011.
    8. 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.
    9. repec:dpr:wpaper:0878 is not listed on IDEAS
    10. repec:eee:jouret:v:93:y:2017:i:3:p:317-335 is not listed on IDEAS
    11. repec:dpr:wpaper:0918 is not listed on IDEAS
    12. repec:eee:indorg:v:56:y:2018:i:c:p:145-167 is not listed on IDEAS
    13. Kitamura, Hiroshi & Matsushima, Noriaki & Sato, Misato, 2018. "Exclusive contracts with complementary inputs," International Journal of Industrial Organization, Elsevier, vol. 56(C), pages 145-167.
    14. Yongmin Chen & David E. M. Sappington, 2011. "Exclusive Contracts, Innovation, and Welfare," American Economic Journal: Microeconomics, American Economic Association, vol. 3(2), pages 194-220, May.
    15. 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.
    16. Lee, Sang-Ho & Matsumura, Toshihiro & Park, Chul-Hi, 2017. "Procurement of Advanced Technology and Welfare-Reducing Vertical Integration," MPRA Paper 79109, University Library of Munich, Germany.

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