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Exclusive contracts with complementary inputs

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  • Kitamura, Hiroshi
  • Matsushima, Noriaki
  • Sato, Misato

Abstract

This study constructs a model of anticompetitive exclusive contracts in the presence of complementary inputs. A downstream firm transforms multiple complementary inputs into final products. When complementary input suppliers have market power, upstream competition within a given input market benefits not only the downstream firm, but also the complementary input suppliers, by raising complementary input prices. Thus, the downstream firm is unable to earn higher profits, even when socially efficient entry is allowed. Hence, the inefficient incumbent supplier can deter socially efficient entry by using exclusive contracts, even in the absence of scale economies, downstream competition, and relationship-specific investment.

Suggested Citation

  • Kitamura, Hiroshi & Matsushima, Noriaki & Sato, Misato, 2018. "Exclusive contracts with complementary inputs," International Journal of Industrial Organization, Elsevier, vol. 56(C), pages 145-167.
  • Handle: RePEc:eee:indorg:v:56:y:2018:i:c:p:145-167
    DOI: 10.1016/j.ijindorg.2017.11.005
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    Cited by:

    1. Hiroshi Kitamura & Noriaki Matsushima & Misato Sato, 2021. "Lease or sale: When a durable goods monopolist can choose supply chain's openness," ISER Discussion Paper 1127, Institute of Social and Economic Research, Osaka University.
    2. 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.
    3. Hiroshi Kitamura & Noriaki Matsushima & Misato Sato, 2021. "Defending home against giants: Exclusive dealing as a survival strategy for local firms," ISER Discussion Paper 1122, Institute of Social and Economic Research, Osaka University.
    4. Saruta, Fuyuki, 2021. "Exclusive contracts and multihoming agents in two-sided markets," MPRA Paper 110070, University Library of Munich, Germany.
    5. Lluis Bru & Daniel Cardona, 2016. "Strategic Sourcing in Procurement," DEA Working Papers 82, Universitat de les Illes Balears, Departament d'Economía Aplicada.

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    More about this item

    Keywords

    Antitrust policy; Complementary inputs; Exclusive dealing; Multiple inputs;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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