American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Exclusive Dealing and Entry, When Buyers Compete: Comment
American Economic Review
vol. 99,
no. 3, June 2009
(pp. 1070–81)
Abstract
In a recent paper, Chiara Fumagalli and Massimo Motta (2006) challenge the idea that an incumbent can foreclose efficient entry in the face of scale economies by using exclusive contracts. They claim that inefficient exclusion does not arise when buyers are homogenous firms that compete downstream. However, when upstream firms can compete in two-part tariffs, their equilibrium analysis contains some errors. Fixing these errors, inefficient exclusion arises when scale economies are sufficiently large or the entrant's cost advantage is not too big. Inefficient exclusion arises to protect industry profits from competition. (JEL L11, L13, L14)Citation
Wright, Julian. 2009. "Exclusive Dealing and Entry, When Buyers Compete: Comment." American Economic Review, 99 (3): 1070–81. DOI: 10.1257/aer.99.3.1070JEL Classification
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
- L13 Oligopoly and Other Imperfect Markets
- L14 Transactional Relationships; Contracts and Reputation; Networks