Naked Exclusion, Efficient Breach, and Downstream Competition
Abraham L. Wickelgren
American Economic Review
no. 4, September 2007
Previous papers by Eric B. Rasmusen, J. Mark Ramseyer, and John S. Wiley, Jr.
(1991) and Ilya R. Segal and Michael D. Whinston (2000) argue that exclusive contracts
can inefficiently deter entry in the presence of scale economies and multiple
buyers. We first show that these results no longer hold when buyers are final
consumers who can breach these contracts and pay expectation damages. We then
show, however, that exclusive contracts can inefficiently deter entry if buyers are
downstream competitors, even in the absence of scale economies and even if breach
is possible. (JEL D86, K21, L11 , L13, L14, L40)
Simpson, John, and Abraham L. Wickelgren.
"Naked Exclusion, Efficient Breach, and Downstream Competition."
American Economic Review,
Economics of Contract: Theory
Production, Pricing, and Market Structure; Size Distribution of Firms
Oligopoly and Other Imperfect Markets
Transactional Relationships; Contracts and Reputation; Networks
Antitrust Issues and Policies: General