Buyers’ miscoordination, entry, and downstream competition

Chiara Fumagalli () and Massimo Motta ()
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Chiara Fumagalli: Università Luigi Bocconi and CSEF

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: This paper shows that buyers’ coordination failures might prevent entry in an industry with an incumbent firm and a more efficient potential entrant. If there was a single buyer, or if all buyers formed a central purchasing agency, coordination failures would be avoided and efficient entry would always occur. More generally, exclusion is the less likely the lower the number of buyers. For any given number of buyers, exclusion is the less likely the more fiercely buyers compete in the downstream market. First, intense competition may prevent miscoordination equilibria from arising; second, in cases where miscoordination equilibria still exist, it lowers the maximum price that the incumbent can sustain at such exclusionary equilibria

Keywords: Countervailing Power; Exclusion; Buyers’ Fragmentation (search for similar items in EconPapers)
JEL-codes: D4 L13 L41 (search for similar items in EconPapers)
Date: 2006-01-01
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (1)

Published in The Economic Journal, 118(531), pp. 1196-1222, August 2008

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http://www.csef.it/WP/wp152.pdf (application/pdf)

Related works:
Journal Article: Buyers' Miscoordination, Entry and Downstream Competition (2008)
Journal Article: Buyers’ Miscoordination, Entry and Downstream Competition (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:152

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