The current literature shows that an incumbent monopolist might prevent entry of a more efficient rival by exploiting externalities among (non-competing) buyers. We show that competition among buyers can eliminate the incentive for exclusion. Under intense downstream competition, if entry took place, a free buyer would become more efficient than rivals and increase its output and profits at the expense of buyers which sign an exclusive deal with the incumbent. Anticipating that orders from a single buyer would trigger entry, no buyer signs the exclusive deal and entry occurs. This result is robust across several specifications of the game.

Exclusive dealing and entry, when buyers compete

Fumagalli, Chiara;Motta, Massimo
2006

Abstract

The current literature shows that an incumbent monopolist might prevent entry of a more efficient rival by exploiting externalities among (non-competing) buyers. We show that competition among buyers can eliminate the incentive for exclusion. Under intense downstream competition, if entry took place, a free buyer would become more efficient than rivals and increase its output and profits at the expense of buyers which sign an exclusive deal with the incumbent. Anticipating that orders from a single buyer would trigger entry, no buyer signs the exclusive deal and entry occurs. This result is robust across several specifications of the game.
2006
Fumagalli, Chiara; Motta, Massimo
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/50649
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