Exclusive Dealing and Entry, when Buyers Compete

Massimo Motta () and Chiara Fumagalli

No 3493, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Rasmusen et al. (1991) and Segal and Whinston (2000) show that an incumbent monopolist might exclude entry of a more efficient competitor, by exploiting externalities among buyers. We show that their results hold only when downstream competition among buyers does not exist or is weak enough. Under fierce downstream competition, the incumbent cannot compensate a deviant buyer who buys from the more efficient entrant. Any such buyer will become more competitive and increase their output ? thus triggering entry ? and profits at the expense of buyers who sign an exclusive deal with the incumbent. Hence, exclusive deals cannot deter efficient entry.

Keywords: Anticompetitive behaviour; Foreclosure; Buyers' coordination (search for similar items in EconPapers)
JEL-codes: K21 L12 L42 (search for similar items in EconPapers)
Date: 2002-08
New Economics Papers: this item is included in nep-ind and nep-law
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Citations: View citations in EconPapers (14)

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Journal Article: Exclusive Dealing and Entry, when Buyers Compete (2006)
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