Exclusion through speculation

Cédric Argenton and Bert Willems

International Journal of Industrial Organization, 2015, vol. 39, issue C, 1-9

Abstract: We demonstrate how an incumbent producer of commodities can use cash-settled derivatives contracts to deter entry and extract rents from a potential competitor. By selling more derivatives than total demand, the producer commits to low prices and forces the entrant to price low upon entry. By setting a high upfront derivatives price, the producer can extract the consumer's gains from those low prices. This exclusionary scheme becomes more difficult when the buyer becomes more risk averse and with multiple buyers.

Keywords: Exclusion; Monopolization; Financial contracts; Derivatives; Risk aversion (search for similar items in EconPapers)
JEL-codes: D43 D86 K21 L12 L42 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S016771871500003X
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Exclusion through speculation (2011)
Working Paper: Exclusion Through Speculation (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:39:y:2015:i:c:p:1-9

DOI: 10.1016/j.ijindorg.2015.01.002

Access Statistics for this article

International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal

More articles in International Journal of Industrial Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().