Exclusive Contracts under Financial Constraints
B.E. Journal of Economics Analysis & Policy, Vol. 11, Issue 1, September 2011
34 Pages Posted: 24 May 2010 Last revised: 25 Apr 2014
Date Written: July 26, 2011
Abstract
This paper constructs a model of anticompetitive exclusive dealing in the presence of financial constraints. Because of the presence of these constraints, the incumbent cannot remain in business if a deviant buyer appears. We argue that the existence of financial constraints eliminates the buyer's profit in deviating from exclusive contracts. As a result, when compared with previous studies, the possibility of exclusion increases. That is, exclusion arises, even when buyers compete less intensively.
Keywords: Vertical Relation, Exclusive Contracts, Financial Constraints
JEL Classification: L12, L41, L42
Suggested Citation: Suggested Citation
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