Wednesday, January 7, 2009
Posted by D. Daniel Sokol
Hiroshi Kitamura (PhD student - Economics, Osaka University) undertakes an analysis of Exclusionary Vertical Contracts with Multiple Entrants.
ABSTRACT: This paper constructs a model of anticompetitive exclusive dealing in the presence of multiple entrants. Unlike a single-entrant model in the extant literature, an entrant competes not only with the incumbent to deal with buyers but also with other entrants. The competition among entrants then plays the role of commitment such that low wholesale prices are offered to buyers when they deviate from exclusive contracts. We argue that this commitment effect becomes a barrier to exclusive dealing and that the results differ drastically from the predictions of the single-entrant framework.