How Does Downstream Firms' Efficiency Affect Exclusive Supply Agreements?

Hiroshi Kitamura, Noriaki Matsushima and Misato Sato

ISER Discussion Paper from Institute of Social and Economic Research, Osaka University

Abstract: 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.

Date: 2013-08, Revised 2015-09
New Economics Papers: this item is included in nep-bec and nep-com
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Citations: View citations in EconPapers (5)

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Journal Article: How Does Downstream Firms’ Efficiency Affect Exclusive Supply Agreements? (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:0878r

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