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Naked exclusion with minimum-share requirements

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Listed:
  • Zhijun Chen
  • Greg Shaffer

Abstract

type="main"> We consider a class of contracts in which buyers commit to giving a seller some minimum share of their total purchases. We show that such contracts can be used by an incumbent seller to reduce the probability of entry by a rival seller when the incumbent can commit to its selling price as part of the contract. We further show that such contracts can be profitable for the incumbent even when exclusive dealing would not be, and even when buyers can coordinate their accept-or-reject decisions. The average price paid by the buyers will be higher and welfare will be lower whether or not the incumbent's exclusionary conduct turns out to be successful in preventing entry.

Suggested Citation

  • Zhijun Chen & Greg Shaffer, 2014. "Naked exclusion with minimum-share requirements," RAND Journal of Economics, RAND Corporation, vol. 45(1), pages 64-91, March.
    • Handle: RePEc:bla:randje:v:45:y:2014:i:1:p:64-91
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    File URL: http://hdl.handle.net/10.1111/1756-2171.12042
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    References listed on IDEAS

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