Monday, April 18, 2011
Posted by D. Daniel Sokol
Ryoko Oki (Graduate School of Economics, University of Tokyo) and Noriyuki Yanagawa (Faculty of Economics, University of Tokyo) research Exclusive Dealing Contracts by Distributors.
ABSTRACT: The existing literature about exclusive dealing contracts has focused on cases where an incumbent manufacturer offers exclusive contracts to deter an entry. In contrast, we consider the case where an incumbent distributor offers exclusive dealing contracts to deter an entry. Exclusive dealing contracts by a distributor are less effective. We will show that the outcome of such contracts is quite different from the outcomes in the traditional literature. If the number of manufacturers is sufficiently high, it is impossible to exclude an efficient entry. Furthermore, if we allow two- part tariff contracts, the entrant distributor can enter the market for any number of manufacturers.