Thursday, August 6, 2009
Posted by D. Daniel Sokol
Ryoko Oki (Graduate School of Economics, University of Tokyo) and Noriyuki Yanagawa (Faculty of Economics, University of Tokyo) analyze Exclusive Dealing and Large Distributors.
ABSTRACT: A seminal work by Fumagalli and Motta (2006) explored that an incumbent manufacturer cannot deter an entry by exclusive dealing contract with distributors. This paper extends the flamework of Fumagalli and Motta and examines a situation in which an incumbent distributor tries to deter an entry of efficient distributor by exclusive dealing contracts with manufacturers. The result of this paper is quite opposite to that of Fumagalli and Motta. The exclusion can be successful. It is an unique equilibrium. In this sence, the effects of exclusive dealing depends on the mareket stiructure. Moreover, we extend our model with an entrant even in upstream. It may decrease the possibility of exclusion but may promote the inefficient vertical relation between the entrants.