American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Exclusive Dealing and Entry, when Buyers Compete
American Economic Review
vol. 96,
no. 3, June 2006
(pp. 785–795)
Abstract
Rasmusen et al. (1991) and Segal and Whinston (2000) show that an incumbent monopolist might prevent entry of a more efficient competitor by exploiting externalities among buyers. We show that their results hold only when downstream competition among buyers is weak. Under fierce downstream competition, if entry took place, a free buyer would become more competitive and increase its output and profits at the expense of buyers that sign an exclusive deal with the incumbent. Anticipating that orders from a single buyer would trigger entry, no buyer will sign the exclusive deal and entry will occur. This result is robust across different specifications of the game. (JEL: K21, L12, L42)Citation
Fumagalli, Chiara, and Massimo Motta. 2006. "Exclusive Dealing and Entry, when Buyers Compete." American Economic Review, 96 (3): 785–795. DOI: 10.1257/aer.96.3.785Additional Materials
JEL Classification
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
- L13 Oligopoly and Other Imperfect Markets
- L14 Transactional Relationships; Contracts and Reputation; Networks