Foreclosure in contests

Derek J. Clark (), Øystein Foros and Jan Sand
Additional contact information
Derek J. Clark: Dept. of Economics and Management, University of Tromsø, Postal: University of Tromsø, Department of Economics and Management, N-9037 Tromsø, Norway, http://www.nfh.uit.no/ansattevis.aspx?id=36

No 2008/27, Discussion Papers from Norwegian School of Economics, Department of Business and Management Science

Abstract: We consider a contest in which one firm is a favourite as it initially has a cost advantage over rivals. Instead of taking the set of rivals as given, we consider the possibility that the favourite transfers the source of its advantage wholly or partially to a subset of rival firms. The result of this may be foreclosure of those firms that do not receive the cost reduction. We present conditions under which this transfer will be expected to occur, and show that the dominant firm will prefer to grant some rivals the maximum cost reduction even if a partial transfer can be made. Furthermore we consider the welfare properties of excluding some rivals. Applications include lobbying, patent races and access to essential infrastructure.

Keywords: Foreclosure; contest (search for similar items in EconPapers)
JEL-codes: D21 L24 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2009-02-10
New Economics Papers: this item is included in nep-ipr and nep-pr~
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Journal Article: Foreclosure in contests (2011)
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