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How Does Downstream Firms' Efficiency Affect Exclusive Supply Agreements?

Listed author(s):
  • Hiroshi Kitamura
  • Noriaki Matsushima
  • Misato Sato

This study constructs a model to examine anticompetitive exclusive supply contracts that prevent an upstream supplier from selling input to a new downstream firm. With regard to the technology to transform input produced by the supplier, as an entrant becomes increasingly efficient, its input demand can decrease, and thus, the supplier earns smaller profits when a socially efficient entry is allowed. Hence, an inefficient incumbent can deter a socially efficient entry through exclusive supply contracts, even in the framework of the Chicago School argument, which comprises a single seller, buyer, and entrant.

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File URL: http://www.iser.osaka-u.ac.jp/library/dp/2013/DP0878R.pdf
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Paper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0878r.

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Date of creation: Aug 2013
Date of revision: Sep 2015
Handle: RePEc:dpr:wpaper:0878r
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