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Naked exclusion under exclusive-offer competition

Author

Listed:
  • Hiroshi Kitamura
  • Noriaki Matsushima
  • Misato Sato

Abstract

This study constructs a model of anticompetitive exclusive-offer competition between two existing upstream firms. Under exclusive-offer competition, the upstream firm's profit depends on the rival's exclusive offer. If the rival makes an exclusive offer acceptable for the downstream firm, the upstream firm is excluded unless it succeeds in exclusion. Consequently, the upper bound of exclusive offers becomes higher than when one of the upstream firms is a potential entrant that cannot make any exclusive offer. Thus, the exclusion of the existing upstream firm can be an equilibrium outcome even in the case where the potential entrant is never excluded.

Suggested Citation

  • Hiroshi Kitamura & Noriaki Matsushima & Misato Sato, 2018. "Naked exclusion under exclusive-offer competition," ISER Discussion Paper 1021, Institute of Social and Economic Research, Osaka University.
    • Handle: RePEc:dpr:wpaper:1021
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    File URL: https://www.iser.osaka-u.ac.jp/library/dp/2018/DP1021.pdf
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    References listed on IDEAS

    as
    1. Chiara Fumagalli & Massimo Motta & Lars Persson, 2009. "On The Anticompetitive Effect Of Exclusive Dealing When Entry By Merger Is Possible," Journal of Industrial Economics, Wiley Blackwell, vol. 57(4), pages 785-811, December.
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    5. Kitamura, Hiroshi & Matsushima, Noriaki & Sato, Misato, 2017. "Exclusive contracts and bargaining power," Economics Letters, Elsevier, vol. 151(C), pages 1-3.
    6. Kitamura, Hiroshi, 2010. "Exclusionary vertical contracts with multiple entrants," International Journal of Industrial Organization, Elsevier, vol. 28(3), pages 213-219, May.
    7. Cédric Argenton, 2010. "Exclusive Quality," Journal of Industrial Economics, Wiley Blackwell, vol. 58(3), pages 690-716, September.
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    11. Joseph Farrell, 2005. "Deconstructing Chicago on Exclusive Dealing," Industrial Organization 0504017, University Library of Munich, Germany.
    12. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
    13. Hiroshi Kitamura & Noriaki Matsushima & Misato Sato, 2024. "How Does Downstream Firms’ Efficiency Affect Exclusive Supply Agreements?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 64(2), pages 219-242, March.
    14. Chiara Fumagalli & Massimo Motta & Thomas Rønde, 2012. "Exclusive Dealing: Investment Promotion May Facilitate Inefficient Foreclosure," Journal of Industrial Economics, Wiley Blackwell, vol. 60(4), pages 599-608, December.
    15. Yong, Jong-Say, 1999. "Exclusionary Vertical Contracts and Product Market Competition," The Journal of Business, University of Chicago Press, vol. 72(3), pages 385-406, July.
    16. Julian Wright, 2009. "Exclusive Dealing and Entry, When Buyers Compete: Comment," American Economic Review, American Economic Association, vol. 99(3), pages 1070-1081, June.
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    18. DeGraba, Patrick, 2013. "Naked exclusion by a dominant input supplier: Exclusive contracting and loyalty discounts," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 516-526.
    19. Abito, Jose Miguel & Wright, Julian, 2008. "Exclusive dealing with imperfect downstream competition," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 227-246, January.
    20. John Simpson & Abraham L. Wickelgren, 2007. "Naked Exclusion, Efficient Breach, and Downstream Competition," American Economic Review, American Economic Association, vol. 97(4), pages 1305-1320, September.
    21. Gratz, Linda & Reisinger, Markus, 2013. "On the competition enhancing effects of exclusive dealing contracts," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 429-437.
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    Cited by:

    1. Ke Liu & Xiaoxuan Meng, 2021. "Exclusive dealing when upstream displacement is possible," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 30(4), pages 830-843, November.
    2. Hiroshi Kitamura & Noriaki Matsushima & Misato Sato, 2021. "Defending home against giants: Exclusive dealing as a survival strategy for local firms," ISER Discussion Paper 1122, Institute of Social and Economic Research, Osaka University.

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