Exclusionary Vertical Contracts with Multiple Entrants
21 Pages Posted: 12 Dec 2008 Last revised: 6 Sep 2011
Date Written: May 19, 2009
This paper constructs a model of anticompetitive exclusive dealing in the presence of multiple entrants. Unlike the single-entrant model in previous literature, an entrant competes not only with the incumbent to deal with buyers but also with other entrants. The competition among entrants then serves as a 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.
Keywords: Vertical Relation, Exclusive Dealing, Multiple Entrants, Antitrust Policy
JEL Classification: L12, L41, L42
Suggested Citation: Suggested Citation