We consider a two-period model with two sellers and one buyer in which the efficient outcome calls for the buyer to purchase one unit from each seller in each period. We show that when the buyer's valuations between periods are linked by switching costs and at least one seller is financially constrained, there are plausible conditions under which exclusion arises as the unique equilibrium outcome (the buyer buys both units from the same seller). The exclusionary equilibria are supported by price-quantity offers in which the excluding seller offeres its second unit at a price that is below its marginal cost of production. In some cases, the price of this second unit is negative. Our findings contribute to the literatures on exclusive dealing, bundling, and loyalty rebates/payments.
|Date of creation:||May 2007|
|Contact details of provider:|| Postal: Norwich, NR4 7TJ|
Phone: +44(0)1603 593715
Fax: +44(0)1603 591622
Web page: http://www.ccp.uea.ac.uk
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ccp:wpaper:wp07-13. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Cheryl Whittkaer)
If references are entirely missing, you can add them using this form.