Pre-commitment to an Exclusive Contract under Partial Regulation

Keizo Mizuno

International Journal of the Economics of Business, 2005, vol. 12, issue 2, 211-223

Abstract: This article examines the welfare implications of an incumbent's pre-commitment to an exclusive contract in a partially regulated environment. It shows that the contract offered to customers in a competitive market makes the first-best allocation infeasible in the partially regulated environment. However, the contract can have a welfare-enhancing property through the exclusion of inefficient entry or cream skimming in the competitive market, especially when the regulated price ceiling is low and the incumbent's technology is characterized by a large proportion of common cost in total cost.

Keywords: Pre-commitment; Exclusive Contract; Partial Regulation; Cream Skimming; JEL classifications: L43; L51; L97 (search for similar items in EconPapers)
Date: 2005
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DOI: 10.1080/13571510500127667

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