We consider a seller's ability to deter potential entrants by offering exclusive contracts to downstream buyers. Previous literature has shown that this can be a profitable strategy if there is a coordination failure on the part of the buyers or if the seller can make discriminatory "divide-and-conquer" offers. This literature assumes that all offers are public. We show that if buyers cannot observe each other's offers and have passive or wary out-of-equilibrium beliefs, the divide-and-conquer exclusion strategy fails. Equilibria in which the incumbent obtains exclusion due to a coordination failure, on the other hand, exist for all out-of-equilibrium beliefs.
"Naked Exclusion with Private Offers."
American Economic Journal: Microeconomics,
Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Economics of Contract: Theory
Oligopoly and Other Imperfect Markets
Firm Organization and Market Structure
Antitrust Issues and Policies: General