This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. Journals
  3. American Economic Review
  4. June 2009
  5. Exclusive Dealing and Entry, When Buyers Compete: Comment

Exclusive Dealing and Entry, When Buyers Compete: Comment

  • Julian Wright
American Economic Review
vol. 99, no. 3, June 2009
(pp. 1070-81)
Download Full Text PDF

Abstract

In a recent paper, Chiara Fumagalli and Massimo Motta (2006) challenge the idea that an incumbent can foreclose efficient entry in the face of scale economies by using exclusive contracts. They claim that inefficient exclusion does not arise when buyers are homogenous firms that compete downstream. However, when upstream firms can compete in two-part tariffs, their equilibrium analysis contains some errors. Fixing these errors, inefficient exclusion arises when scale economies are sufficiently large or the entrant's cost advantage is not too big. Inefficient exclusion arises to protect industry profits from competition. (JEL L11, L13, L14)

Citation

Wright, Julian. 2009. "Exclusive Dealing and Entry, When Buyers Compete: Comment." American Economic Review, 99 (3): 1070-81. DOI: 10.1257/aer.99.3.1070

JEL Classification

  • L11 Production, Pricing, and Market Structure; Size Distribution of Firms
  • L13 Oligopoly and Other Imperfect Markets
  • L14 Transactional Relationships; Contracts and Reputation; Networks