Exclusive dealing contract and inefficient entry threat

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

Economics Bulletin, 2010, vol. 30, issue 3, 2478-2485

Abstract: This paper examines the effects of exclusive dealing contracts offered by an incumbent distributor to an incumbent manufacturer with entrants in both manufacturing and distribution sectors. It is well-known that a potential entry threat is welfare increasing under homogenous price competition, even though the potential entrant is less productive. This paper reexamines this intuition. We show that the entry threat of a less-productive manufacturer is welfare decreasing when there is an exclusive dealing contract between the incumbent manufacturer and distributor.

Keywords: Exclusive Dealing; Entry Threat; Vertical Restraint; Antitrust (search for similar items in EconPapers)
JEL-codes: L1 L4 (search for similar items in EconPapers)
Date: 2010-09-23
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