Buyers’ miscoordination, entry, and downstream competition
This paper shows that buyers’ coordination failures might prevent entry in an industry with an incumbent firm and a more efficient potential entrant. If there was a single buyer, or if all buyers formed a central purchasing agency, coordination failures would be avoided and efficient entry would always occur. More generally, exclusion is the less likely the lower the number of buyers. For any given number of buyers, exclusion is the less likely the more fiercely buyers compete in the downstream market. First, intense competition may prevent miscoordination equilibria from arising; second, in cases where miscoordination equilibria still exist, it lowers the maximum price that the incumbent can sustain at such exclusionary equilibria
|Date of creation:||01 Jan 2006|
|Date of revision:|
|Publication status:||Published in The Economic Journal, 118(531), pp. 1196-1222, August 2008|
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