Naked Exclusion, Efficient Breach, and Downstream Competition
- (pp. 1305-1320)
Abstract
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)Citation
Simpson, John, and Abraham L. Wickelgren. 2007. "Naked Exclusion, Efficient Breach, and Downstream Competition." American Economic Review, 97 (4): 1305-1320. DOI: 10.1257/aer.97.4.1305JEL Classification
- D86 Economics of Contract: Theory
- K21 Antitrust Law
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
- L13 Oligopoly and Other Imperfect Markets
- L14 Transactional Relationships; Contracts and Reputation; Networks
- L40 Antitrust Issues and Policies: General