Exclusive contracts with complementary inputs

Hiroshi Kitamura, Noriaki Matsushima, Misato Sato

Research output: Contribution to journalArticle

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.

Original languageEnglish
Pages (from-to)145-167
Number of pages23
JournalInternational Journal of Industrial Organization
Volume56
DOIs
Publication statusPublished - Jan 2018
Externally publishedYes

Fingerprint

Profitability
Exclusive contracts
Suppliers
Incumbents
Input prices
Market power
Relationship-specific investments
Profit
Economies of scale

Keywords

  • Antitrust policy
  • Complementary inputs
  • Exclusive dealing
  • Multiple inputs

ASJC Scopus subject areas

  • Industrial relations
  • Aerospace Engineering
  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)
  • Strategy and Management
  • Industrial and Manufacturing Engineering

Cite this

Exclusive contracts with complementary inputs. / Kitamura, Hiroshi; Matsushima, Noriaki; Sato, Misato.

In: International Journal of Industrial Organization, Vol. 56, 01.2018, p. 145-167.

Research output: Contribution to journalArticle

Kitamura, Hiroshi ; Matsushima, Noriaki ; Sato, Misato. / Exclusive contracts with complementary inputs. In: International Journal of Industrial Organization. 2018 ; Vol. 56. pp. 145-167.
@article{ef017a6ad2b940ae96534770cf3c8b04,
title = "Exclusive contracts with complementary inputs",
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",
author = "Hiroshi Kitamura and Noriaki Matsushima and Misato Sato",
year = "2018",
month = "1",
doi = "10.1016/j.ijindorg.2017.11.005",
language = "English",
volume = "56",
pages = "145--167",
journal = "International Journal of Industrial Organization",
issn = "0167-7187",
publisher = "Elsevier Inc.",

}

TY - JOUR

T1 - Exclusive contracts with complementary inputs

AU - Kitamura, Hiroshi

AU - Matsushima, Noriaki

AU - Sato, Misato

PY - 2018/1

Y1 - 2018/1

N2 - 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.

AB - 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.

KW - Antitrust policy

KW - Complementary inputs

KW - Exclusive dealing

KW - Multiple inputs

UR - http://www.scopus.com/inward/record.url?scp=85039155151&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85039155151&partnerID=8YFLogxK

U2 - 10.1016/j.ijindorg.2017.11.005

DO - 10.1016/j.ijindorg.2017.11.005

M3 - Article

AN - SCOPUS:85039155151

VL - 56

SP - 145

EP - 167

JO - International Journal of Industrial Organization

JF - International Journal of Industrial Organization

SN - 0167-7187

ER -