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Exclusive dealing contract and inefficient entry threat

Author

Listed:
  • Noriyuki Yanagawa

    (Faculty of Economics, University of Tokyo)

  • Ryoko Oki

    (Graduate School of Economics, University of Tokyo)

Abstract

This paper examines the effects of exclusive dealing contracts offered by an incumbent distributor to an incumbent manufacturer with entrants in both manufacturing and distribution sectors. It is well-known that a potential entry threat is welfare increasing under homogenous price competition, even though the potential entrant is less productive. This paper reexamines this intuition. We show that the entry threat of a less-productive manufacturer is welfare decreasing when there is an exclusive dealing contract between the incumbent manufacturer and distributor.

Suggested Citation

  • Noriyuki Yanagawa & Ryoko Oki, 2010. "Exclusive dealing contract and inefficient entry threat," Economics Bulletin, AccessEcon, vol. 30(3), pages 2478-2485.
    • Handle: RePEc:ebl:ecbull:eb-10-00438
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    File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I3-P227.pdf
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    More about this item

    Keywords

    Exclusive Dealing; Entry Threat; Vertical Restraint; Antitrust;
    All these keywords.

    JEL classification:

    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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