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Pre-commitment to an Exclusive Contract under Partial Regulation

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  • Keizo Mizuno

Abstract

This article examines the welfare implications of an incumbent's pre-commitment to an exclusive contract in a partially regulated environment. It shows that the contract offered to customers in a competitive market makes the first-best allocation infeasible in the partially regulated environment. However, the contract can have a welfare-enhancing property through the exclusion of inefficient entry or cream skimming in the competitive market, especially when the regulated price ceiling is low and the incumbent's technology is characterized by a large proportion of common cost in total cost.

Suggested Citation

  • Keizo Mizuno, 2005. "Pre-commitment to an Exclusive Contract under Partial Regulation," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 12(2), pages 211-223.
    • Handle: RePEc:taf:ijecbs:v:12:y:2005:i:2:p:211-223
    DOI: 10.1080/13571510500127667
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    References listed on IDEAS

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    1. Mark Armstrong & Simon Cowan & John Vickers, 1994. "Regulatory Reform: Economic Analysis and British Experience," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510790, April.
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    More about this item

    Keywords

    Pre-commitment; Exclusive Contract; Partial Regulation; Cream Skimming; JEL classifications: L43; L51; L97;
    All these keywords.

    JEL classification:

    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L97 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Utilities: General

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