Exclusive Dealing and Entry, When Buyers Compete: Comment

Julian Wright

American Economic Review, 2009, vol. 99, issue 3, 1070-81

Abstract: In a recent paper, Chiara Fumagalli and Massimo Motta (2006) challenge the idea that an incumbent can foreclose efficient entry in the face of scale economies by using exclusive contracts. They claim that inefficient exclusion does not arise when buyers are homogenous firms that compete downstream. However, when upstream firms can compete in two-part tariffs, their equilibrium analysis contains some errors. Fixing these errors, inefficient exclusion arises when scale economies are sufficiently large or the entrant's cost advantage is not too big. Inefficient exclusion arises to protect industry profits from competition. (JEL L11, L13, L14)

JEL-codes: L11 L13 L14 (search for similar items in EconPapers)
Date: 2009
Note: DOI: 10.1257/aer.99.3.1070
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Citations: View citations in EconPapers (48)

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