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Exclusive contracts with complementary inputs

Hiroshi Kitamura, Noriaki Matsushima and Misato Sato

International Journal of Industrial Organization, 2018, vol. 56, issue C, 145-167

Abstract: This study constructs a model of anticompetitive exclusive contracts in the presence of complementary inputs. A downstream firm transforms multiple complementary inputs into final products. When complementary input suppliers have market power, upstream competition within a given input market benefits not only the downstream firm, but also the complementary input suppliers, by raising complementary input prices. Thus, the downstream firm is unable to earn higher profits, even when socially efficient entry is allowed. Hence, the inefficient incumbent supplier can deter socially efficient entry by using exclusive contracts, even in the absence of scale economies, downstream competition, and relationship-specific investment.

Keywords: Antitrust policy; Complementary inputs; Exclusive dealing; Multiple inputs (search for similar items in EconPapers)
JEL-codes: L12 L41 L42 C72 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Exclusive Contracts with Complementary Inputs (2015) Downloads
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Handle: RePEc:eee:indorg:v:56:y:2018:i:c:p:145-167