Exclusive Dealing Contracts by Distributors

Ryoko Oki and Noriyuki Yanagawa
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Ryoko Oki: Graduate School of Economics, University of Tokyo
Noriyuki Yanagawa: Faculty of Economics, University of Tokyo

No CARF-F-243, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: The existing literature about exclusive dealing contracts has focused on cases where an incumbent manufacturer offers exclusive contracts to deter an entry. In contrast, we consider the case where an incumbent distributor offers exclusive dealing contracts to deter an entry. Exclusive dealing contracts by a distributor are less effective. We will show that the outcome of such contracts is quite different from the outcomes in the traditional literature. If the number of manufacturers is sufficiently high, it is impossible to exclude an efficient entry. Furthermore, if we allow two- part tariff contracts, the entrant distributor can enter the market for any number of manufacturers.

Pages: 22 pages
Date: 2011-02
New Economics Papers: this item is included in nep-bec and nep-com
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