Exclusive Contracts with Complementary Inputs

40 Pages Posted: 9 Jan 2015 Last revised: 29 Nov 2017

See all articles by Hiroshi Kitamura

Hiroshi Kitamura

Kyoto Sangyo University

Noriaki Matsushima

Osaka University - Institute of Social and Economic Research (ISER)

Misato Sato

Kyoto Sangyo University

Multiple version iconThere are 2 versions of this paper

Date Written: November 29, 2017

Abstract

This study constructs a model of anticompetitive exclusive contracts in the presence of complementary inputs. A downstream firm transforms multiple complementary inputs into final products. When complementary input suppliers have market power, upstream competition within a given input market benefits not only the downstream firm, but also the complementary input suppliers, by raising complementary input prices. Thus, the downstream firm is unable to earn higher profits, even when socially efficient entry is allowed. Hence, the inefficient incumbent supplier can deter socially efficient entry by using exclusive contracts, even in the absence of scale economies, downstream competition, and relationship-specific investment.

Keywords: Antitrust policy; Complementary inputs; Exclusive dealing; Multiple inputs

JEL Classification: L12, L41, L42

Suggested Citation

Kitamura, Hiroshi and Matsushima, Noriaki and Sato, Misato, Exclusive Contracts with Complementary Inputs (November 29, 2017). International Journal of Industrial Organization, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2547416

Hiroshi Kitamura

Kyoto Sangyo University ( email )

Motoyama, Kamigamo, Kita-Ku
Kyoto, Kyoto 603-8555
Japan

HOME PAGE: http://sites.google.com/view/hiroshikitamura/home

Noriaki Matsushima (Contact Author)

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan

Misato Sato

Kyoto Sangyo University ( email )

Motoyama Kamigamo
Kyoto, Kyoto 603-8555
Japan

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