Buyers' Coordination and Entry

Massimo Motta () and Chiara Fumagalli

No 2908, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Miscoordination of buyers might prevent entry in an industry with an incumbent and a more efficient potential entrant. Buyers' power therefore favours entry by eliminating coordination problems. We also identify a mechanism which facilitates entry: if the potential entrant could credibly offer to pay a penalty for unfulfilled orders, miscoordination would be eliminated. Without the penalty, we show that downstream competition also facilitates entry. The stronger the competition among buyers the less likely that miscoordination arises.

Keywords: Miscoordination; Entry; Countervailing power; Contractual clauses; Exclusion; Retailers (search for similar items in EconPapers)
JEL-codes: D40 L13 L22 L40 M21 (search for similar items in EconPapers)
Date: 2001-08
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Citations: View citations in EconPapers (2)

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